European Central Bank working paper links newspaper inflation narrative disagreement to wider household expert expectation gaps

The European Central Bank published a working paper analysing whether disagreement between general-audience and specialised newspapers over demand-side versus supply-side explanations for inflation helps explain the gap between households’ inflation expectations and professional forecasters’ expectations. The paper finds that the absolute household-expert expectation gap widens when narrative disagreement across these media sources increases, with general newspapers’ narratives aligning with households’ demand-supply views but not with experts’ views. The study builds text-based measures of inflation narratives from more than 180,000 US newspaper articles from 1991 to 2022, using a “Causality Extraction” method to identify explicit causal statements about what drives inflation and classify them into demand and supply narratives. Comparing these indicators with the University of Michigan Survey of Consumers and the Survey of Professional Forecasters, the results show stronger effects for older and non-college-educated households and when inflation is higher or more persistent. The paper also reports that specialised newspaper narratives align with experts’ views and with realised inflation-unemployment dynamics, while general newspapers do not, and notes that the aggregate news measures limit causal identification, pointing to the need for clear, consistent explanations of inflation drivers to reach broad audiences through multiple channels.