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\\ \\ Boris Vujčić\\ \\ Vice-President of the European Central Bank

Speech by Boris Vujčić, Vice-President of the ECB, at the inauguration of the Alexander von Humboldt Professorship awarded to Professor Michael Weber at the European School of Management and Technology (ESMT) Berlin

Thank you, Michael, and thank you to ESMT for the invitation. It is a pleasure to be here for this inauguration and to speak about a topic to which Michael has made an outstanding contribution: how households form expectations and why those expectations matter for monetary policy.

Monetary policy is, by its nature, forward-looking. We track inflation, wages, consumption, credit and financial conditions. But none of these data fully tell us what households believe and how these beliefs feed into their economic and financial decisions, how uncertain they are, or why similar shocks produce different responses across population sub-groups and countries.

The insights from expectations surveys matter, because expectations about the future shape decisions and behaviour today. Expectations about inflation, income, employment, interest rates and house prices affect spending, saving, investment, borrowing and wage demands. They therefore play a key role in shaping the transmission mechanism of monetary policy.

For a long time, macroeconomic analysis often relied on strong assumptions that expectations were rational. Over the past two decades, evidence has shown the limits of those assumptions for many policy questions. A foundational contribution was to measure expectations directly rather than infer them from outcomes alone.\ [1\]

See Manski, C.F. (2004), “Measuring Expectations”, Econometrica, Vol. 72, No 5, pp. 1329-1376.

This became much more feasible as the internet and mobile technologies became more widely used. Online survey data collection, better questionnaire design and more effective sampling methods now allow high-quality, population-representative evidence to be collected in a very timely manner. The ECB’s Consumer Expectations Survey is a case in point, as is the recent work by the Bank for International Settlements.\ [2\]

See the “ Consumer Expectations Survey” page on the ECB’s website and D’Acunto, F., De Fiore, F., Sandri, D. and Weber, M. (2025), “ A global survey of household perceptions and expectations”, BIS Quarterly Review, Bank for International Settlements, 15 September.

This research has improved our understanding of expectations formation and its role in shaping aggregate economic outcomes.

Alexander von Humboldt would no doubt have approved of this enhanced approach to measuring expectations because it follows his maxim about observing carefully before generalising. Economists have not always followed that sequence as faithfully as they might. By contrast, Michael Weber has been at the forefront of research in this area, particularly in advancing our understanding of household inflation expectations and their implications for monetary policy.

In my remarks today, I will focus on three areas: recent advances in our understanding of household expectations; how these insights have informed policy analysis in a period of inflation shocks and geopolitical stress; and the lessons we can draw for communication, trust and credibility.

Recent advances in our understanding of household expectations

Let me begin with a simple observation. Households do not form expectations in the same way as professional forecasters. Most people do not continuously process the full range of macroeconomic data. Their attention is selective, their information is incomplete and their beliefs are widely dispersed. This dispersion is not simply noise: it reflects differences in income, wealth, housing, financial literacy, lived experience and trust in institutions.\ [3\]

See, for example, D’Acunto, F., Malmendier, U., Ospina, J. and Weber, M. (2021), “Exposure to Grocery Prices and Inflation Expectations”, Journal of Political Economy, Vol. 129, No 5, pp. 1615-1639, and D’Acunto, F., Charalambakis, E., Georgarakos, D., Kenny, G., Meyer, J. and Weber, M. (2024), “Household inflation expectations: an overview of recent insights for monetary policy”, Discussion Paper Series, No 24, ECB.

Research co-authored by Michael has shown how salient prices, especially food and fuel prices, can disproportionately shape inflation perceptions and expectations.\ [4\]

See D’Acunto, F., Malmendier, U., Ospina, J. and Weber, M. (2021), “Exposure to Grocery Prices and Inflation Expectations”, Journal of Political Economy, Vol. 129, No 5, pp. 1615-1639.

Related evidence helps explain the persistent gender gap in inflation expectations, partly through differences in the information environments and in exposure to shopping-related price signals.\ [5\]