Tag: salience

Under one roof: housing and inflation expectations

Vedanta Dhamija, Ricardo Nunes and Roshni Tara

Inflation has been widely discussed in recent years, from supermarket aisles to newspapers. But what if what people think inflation is stems not only from grocery prices or energy bills, but from more? Our analysis in Dhamija et al (2026) shows house prices matter in this context, ie housing is salient. Using household surveys for the United States, we find that people tend to overweight their expectations about house prices when thinking about inflation with a coefficient of 25%–45%, significantly above the weight of house prices in the inflation index. Should central banks care about this? The short answer is yes.

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Should the true costs of insuring deposits of up to £75,000 be made clearer?

Andrew Hewitt.

Deposit insurance schemes guard against bank runs by reducing or removing individual depositors’ incentives to withdraw their funds if they believe their bank to be in trouble. They help protect depositors but they risk also protecting risky bank business models by removing depositors’ incentives to avoid riskier banks. What can be done about this? In the past the answer was sometimes to make small depositors bear part of the risk through “co-insurance”. This was proven not to be credible. In this blog I consider some of the options available, including the risk-based levies currently being introduced in the EU and elsewhere, and increased transparency, drawing on recent literature on the saliency of tax in consumer choices.

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