Forming Opinions on Perceived and Expected Inflation. A View by Behavioural Economics

This paper analyses formation of consumer opinions on perceived and expected inflation in the Euro area and selected transition economies in 1985 2008. Selected social and demographic groups accounted for their own patterns of price perception and forecasting. These patterns repeated in all countries observed Consumer's sense of his/her familiarity and competence regarding the price development were main factors in evaluation of inflation rates by knowledgeable individuals and proved useful, when estimating actual price growth. Familiarity and competence, however, misled when estimating future price growth.