An Indicator of Inflation Expectations Anchoring

We compare the degree of anchoring of inflation expectations in the euro area, the United States and the United Kingdom, focusing on the post-crisis period. First of all, we estimate a set of measures of average and tail correlation using inflation swaps and options, as proposed by Natoli and Sigalotti (2016). To quantify the degree of anchoring, we also propose a new indicator based on the results of a logistic regression, obtained by measuring the odds that strong negative shocks to short-term expectations are connected to large declines in long-term expectations. The results reveal an increase in the risk of de-anchoring during the last quarter of 2014 for the euro area. While showing a significant reduction after the peak, our de-anchoring indicator remains high and volatile for 2015 and 2016. Inflation expectations in the US and the UK are instead found to be firmly anchored.