Empirical Estimation of Inflation Expectations Anchoring in Russia

At the end of 2014, the Bank of Russia switched to a new monetary policy regime - inflation targeting. An integral part of this regime is the formation and maintenance of stable inflation expectations. Stable or anchored expectations increase the effectiveness of inflation targeting. Anchored inflation expectations are expectations that are resistant to various short-term shocks and surprises from macroeconomic news, independent of past inflation. This paper examines the inflation expectations of the population, businesses, professional analysts and financial market participants from June 2018 to March 2020. The expectations of the population, businesses and analysts of Bloomberg, Interfax and Thomson Reuters are published in reports of the Bank of Russia on a monthly basis. The HSE Centre of Development Institute Also publishes quarterly consensus forecasts. Expectations of professional market participants were considered using fund market data. Anchoring is assessed by testing the characteristics of anchored inflation expectations and building an ESTAR model. The paper shows that the inflation expectations of the population and analysts of Bloomberg, Interfax and Thomson Reuters remain no anchored, in contrast to the expectations of analysts of the Center of Development Institute. The Central Bank can significantly influence the expectations of businesses through interventions: messages about the target level and its forecasts of inflation. And the expectations of professional market participants reflect the real macro situation.