September 22, 2025, Filed Under: Working PaperFirms’ Inflation and Wage Expectations During the Inflation Surge EMPCT Working Paper Series No. 2025-0465 pages | PDF Download | PDF in Browser Citation:Erwan Gautier, Frédérique Savignac, and Olivier Coibion, “Firms’ Inflation and Wage Expectations During the Inflation Surge”, May 2025 AbstractUsing a new survey of French firms’ inflation expectations that predates the inflation spike, we document i) evidence on the anchoring of inflation expectations during the inflation surge, and ii) the relevance of inflation expectations for firms’ decisions. First, we show that inflation expectations under-responded to the initial surge but then persistently overshot actual inflation dynamics. As inflation rose, firms initially perceived inflation to be less persistent than in previous years, an effect that dissipated over time. Second, we find that inflation expectations correlate with firms’ wage and price decisions. One-year expectations matter more than long-term expectations. During the inflation surge, wage and price decisions became increasingly disconnected from inflation expectations. This suggests that the scope for wage-price spirals is likely more limited than one might have expected from the surge in inflation and inflation expectations.
