What do households (not economists) think inflation will be in three years? I use the deviation of forecast from target as a proxy measure for credibility regarding inflation. {chart} Figure 1: Median 3 year CPI inflation forecast (black), 25th, 75th percentile (gray), in %. CPI inflation consistent with 2% PCE inflation target (red dashed line). NBER defined peak-to-trough recession dates shaded gray. Source: NY Fed, NBER, and author’s calculations. As of February 2024, the inflation rate expected 3 years out is lower than it was in January 2021. While expected CPI inflation has declined, dispersion of forecasts has ... (full story)