Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Inflation and price development
No. 204

Inflation Preferences

We document novel survey-based facts about preferred long-run inflation rates among US consumers. Consumers on average prefer a 0.20% annual inflation rate, well below the Federal Reserve’s 2% tar-get. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on eco-nomic models – describing how inflation lowers the real value of wages and money holdings – affect inflation preferences. While our results can inform the design of central bank communication on infla-tion targets, they also raise questions about the alignment between such targets and consumer preferences.