A second challenge is connected with understanding how inflation expectations affect economic decisions and what their formation mechanism is, including which variables provide insights into their evolution. The availability of direct data on inflation expectations has recorded substantial progress in the last three decades, building on the seminal surveys and research produced after World War II and until the 1980s.
Notwithstanding the initial poor designs, the qualitative (or “tendency”) rather than quantitative nature of many of the responses, the prevalence of short time horizons and the lack of information other than the average of individual expectations, many important insights have been obtained over the years.