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The inflation expectations of individuals who lead firms can influence the prices that their firms charge customers and hence can influence overall inflation. This Economic Commentary summarizes results from the Survey of Firms’ Inflation Expectations (SoFIE), which asks top business executives for their inflation expectations once per quarter alongside a second question from a rotating set. We document that this group’s inflation expectations increased with the run-up in inflation over 2021 and 2022 but then began to decline in early 2023. The Cleveland Fed will post estimates from the Survey of Firms’ Inflation Expectations each quarter, available via clefed.org/SoFIE.

We study the reaction of voters to shifts in local economic conditions. Using the departure from the gold standard of US trading partners in 1931 and the US in 1933, we exploit heterogeneity in export destinations, creating local differences in expenditure-switching in US counties by isolating the aggregate effects of the monetary shocks using time fixed effects. We find significant changes in local voting behavior in response to both shocks, one originating abroad, and another domestically. The response to both shocks have similar magnitude. We argue that voters punished and rewarded incumbents regardless of the shocks’ origin, implying strong feedback from economic conditions to electoral outcomes.

Using a novel experimental setup, we study the direction of causality between consumers’ inflation expectations and their income growth expectations. In a large, nationally representative survey of US consumers, we find that the rate of passthrough from expected inflation to expected income growth is incomplete, on the order of 20 percent. There is no statistically significant effect going in the other direction. Passthrough varies systematically with demographic and socioeconomic factors, with greater passthrough for higher-income individuals than lower-income individuals, although it is still incomplete. Higher inflation expectations also cause consumers to report a higher probability that they will search for a new job that pays more. Using our survey findings to calibrate a search-and-matching model, we find that dampened responses of real wages to demand and supply shocks translate into greater fluctuations in output. Taken together, the survey results and model exercises provide a labor market channel to explain why people dislike inflation.

We show that inflation expectations are heterogeneous and depend on past individual experiences. We propose a diagnostic expectations-augmented Kalman filter to represent consumers’ heterogeneous inflation expectations-formation process, where heterogeneity comes from an anchoring-to-the-past mechanism. We estimate the diagnosticity parameter that governs the inflation expectations-formation process and show that the model can replicate systematic differences in inflation expectations across cohorts in the US. We introduce this mechanism into a New Keynesian model and find that heterogeneous expectations anchor aggregate responses to the agents’ memory, making shocks more persistent. Central banks should be more active to prevent agents from remembering current shocks far into the future.

Motivated by the dominant role of the US dollar, we explore how monetary policy (MP) shocks in the US can affect a small open economy through the expectation channel. We combine data from a panel survey of firms' expectations in Uruguay with granular information about firms' debt position and total imports on a monthly basis. We show that a contractionary MP shock in the US reduces firms' inflation and cost expectations in Uruguay. This result contrasts with the inflationary effect of this shock on the Uruguayan economy, suggesting uncertainty about the policy regime. We discuss the issues and challenges of this expectation channel.

Based on indirect utility theory, we introduce a novel methodology of measuring inflation expectations indirectly. This methodology starts at the individual level, asking consumers about the change in income required to buy the same amounts of goods and services one year ahead. Analytically, our methodology possesses smaller ex-post aggregate inflation forecast errors relative to forecasts based on conventional survey questions. We ask this question in a large-scale, high-frequency survey of consumers in the US and 14 countries, and we show that indirect consumer inflation expectations perform well along several empirical dimensions. Exploiting the geographically detailed, high-frequency variation in the data, we then show that individual experiences matter for inflation expectations, in a nuanced way. For example, age and gender have different effects internationally, while individual inflation and local experiences are generally highly relevant. In an application to gasoline price changes, we identify large effects of experienced gasoline price changes on inflation expectations, characterized by both overreaction and persistence.

Soil has the potential to sequester or to emit great amounts of CO2, since soil carbon stocks constitute the largest terrestrial reservoir of carbon. Land-use is among the main factors affecting the net storage or the net mineralization of soil organic carbon (SOC) and land-use policies are currently aiming to increase soil organic carbon stocks.However, adding labile sources of carbon to soil (e.g. more crop residues or manure) may alter the carbon cycle, increasing the microbial degradation of the existing SOC pools, a process called “priming effect” (PE). PE could significantly reduce the net storage of carbon and taking into account this effect into carbon storage models may alter their predictions.Land-use is one of the numerous constraints that influence PE, together with soil chemical, biological and physical properties, all of them are contributing to shape the chemical composition of the SOC pools. The objectives of this study are:- to conduct a fingerprint characterization of the chemical composition of soil organic matter using analytical pyrolysis coupled to gas chromatography and mass spectrometry;- to use pyrograms to decipher which soil chemical markers are the most relevant descriptors of the PE;- to relate those chemical markers to the different types of crop rotations.This approach will help to decipher the complex interactions of the PE descriptors and to relate PE intensity to specific land-uses for a determined area, identifying which land management is capable to reduce soil susceptibility to priming effect and to be more efficient in term of net SOC storage.With this purpose, soil samples from 88 agricultural farms within a 12 km2 water catchment in Brittany (France) were incubated in presence of a 13C labelled wheat litter to measure the PE. Data regarding soil chemistry, soil microbial diversity, crop rotation, land-use, and manuring obtained for the studied farms were coupled to pyrograms to select the most relevant descriptors of the priming effect.Our results showed that:- the inclusion of grassland into crop rotation reduce the susceptibility of soils to PE, but only if grassland is maintained for an adequate period of the rotation time;- although PE is a microbial process, only a marginal part of its total variance is assigned to both richness and evenness of microbial communities;- the intensity of PE is correlated with the concentration of condensed aromatic compounds in soil water extracts, identified with excitation-emission fluorescence spectroscopy;- the intensity of the PE decreases with the molecular complexity of the soil organic matter assessed with pyrolysis coupled to gas chromatography and mass spectrometry.Disclosure of Interest: None declared

International audience; Background and objectives. - The French national authority for health (Haute Autorite de sante: HAS) and the French clinical toxicology society (Societe de toxicologie clinique: STC) received a formal request from the French ministry for heath to elaborate recommendations for the screening of environmental overexposure to inorganic arsenic (iAs), for the medical management of overexposed patients and for the medical surveillance of exposed population.Methods. - The method used for the elaboration was the Clinical practice guidelines method recommended by HAS in this situation (HAS, 2010).Results. - The recommendations are presented in the present article. They concern: a) identification of those sites with a high risk of iAs overexposure for the residents (using bioaccessible concentrations in soils); the target population for Asi overexposure screening and screening modalities (using measurement of iAs and its metabolites in urine); b) the biomonitoring indications and modalities for overexposed individuals; c) the fraction of the population with iAs environmental exposure which should be the target for the detection and the diagnosis of complications, and the modalities of these operations; d) the treatment and prevention of iAs environmental overexposure. (C) 2020 Elsevier Masson SAS. All rights reserved.; RésuméContexte et objectifsÀ la demande de la Direction générale de la santé, la Haute Autorité de santé (HAS), en partenariat avec la Société de toxicologie clinique (STC) et avec la collaboration de la Société française de médecine du travail (SFMT), la Société française de santé publique (SFSP), la Société française de toxicologie analytique (SFTA) et la Société francophone de santé-environnement (SFSE) a élaboré des recommandations pour le dépistage des surexpositions environnementales à l’arsenic inorganique (Asi) et la prise en charge des populations concernées.MéthodeLa méthode d’élaboration utilisée est celle des Recommandations pour la pratique clinique (RPC) de la HAS (HAS, 2010).RésultatsLes recommandations élaborées identifient : les sites susceptibles d’entraîner des surexpositions environnementales, à partir de la concentration d’Asi dans leur sol ; la fraction des résidents qui constitue la population cible du dépistage ; les modalités de ce dépistage qui utilise le dosage de l’Asi et de ses métabolites dans les urines. En fonction des résultats du primo-dépistage, elles précisent les indications et le déroulement de la surveillance biométrologique. Elles indiquent la fraction de la population exposée qui constitue la cible de la recherche de complications de la surexposition environnementale à l’Asi. Elles précisent les modalités de cette recherche. Enfin, elles proposent des mesures pour le traitement et la prévention des contaminations par l’Asi de l’environnement.