Who is responsible for determining the anticipated (or expected) rate of inflation?

Question

Can you provide a website that supports your answer?

Answer 1

The Bureau of Labor Statistics

Answer 2

You are!

When analysing issues about how inflation affects consumers, then what really matters is what consumers think (including you). While various organisations do surveys of consumers, survey responses don't matter, what matters is how they behave. Therefore, if consumers behave as if they expect inflation to be 3%, then it is completely irrelevant if they say 4% when asked for some survey. This means that it is often extremely difficult to work out inflation expectations with any accuracy.

When analysing how inflation expectations affect financial markets, then it is the expectations fo traders in the financial markets that matters. Once again, you can do surveys, but these typically aren't that useful (none of the companies that do the surveys will tell you this though since they want to sell their reports). A better way is to assume that financial markest are reasonably efficient and look at the different rates of return on similar assets, where one is affected by inflation and the other isn't. For example, the yield on indexed bonds excludes inflation expectations since the bond is indexed to the CPI or some other inflation measure. If you subtract this from the yield on a normal bond, then you get a reasonable estimate of traders' inflation expectations, although it is important to remember that there may also be a small margin in the difference that reflects insurance against these expectations being incorrect.