Is the credibility of the Federal Reserve and the ECB suffering? Analysts at Natixis have looked at different measurements of expected inflation, in the short and medium and long term, to analyse changes in central bank credibility.
How can central bank credibility be measured?
“If central bank credibility is affected by the recent inflation episode, medium and long-term expected inflation is increased.”
We see a slight increase in all medium and long-term inflation expectations (3-year, 5-year and 10-year) of 50 to 100 basis points. So there is a slight loss of central bank credibility associated with their weak response to inflation in 2021-2022-2023.”
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