Inflation Preferences

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.