Women expect higher inflation than men, driven by food costs

Women expect higher inflation than men, driven by food costs

Women expect higher inflation then men and their outlook is primarily driven by food costs, a European Central Bank study found on Wednesday, a potential concern for policymakers as the rise in food prices is in double digit territory and increasing.

With inflation at a record high across the euro zone, the ECB has been raising interest rates quickly on concerns that it gets embedded in expectations, perpetuating rapid price growth in a hard-to-break cycle that could force it to tighten policy even more.

These fears appear to be substantiated by the study which showed that perception of food inflation matters the most and women tended to adjust their expectations disproportionately.

“A one-percentage-point increase in perceived food inflation will raise women’s short-term — one-year ahead — inflation expectations by 0.40 percentage points,” the study, published as an ECB blog post, showed.

“By contrast, the impact on men’s expectations is 0.26 percentage points,” the study said. “In reality, the share of food, beverages and tobacco in the price index is actually only 21 percent.”

Food price inflation was over 10% in August compared to levels below 2% a year ago and was the biggest driver of overall inflation on a monthly basis.

Headline inflation could peak around 10% near the turn of the year and the ECB is trying to bring it down to 2% but its projections show price growth still above this target in 2024, justifying rate hikes at every remaining policy meeting this year.

The gap in expectations between the genders is so big that women see overall inflation a full percentage point higher as they tend to place more emphasis on perceived inflation.

This gap is particularly wide in the 34 to 49 age group and does not appear to exist below the age of 34, indicating that this is a target group the ECB needs to address in its communication, the study argued.