Staff Working Paper No. 1,085
By Ivan Yotzov, Nicholas Bloom, Philip Bunn, Paul Mizen and Gregory Thwaites
This paper analyses the response of UK firms to monthly CPI inflation releases using high‑frequency data from a large business survey. Firms’ inflation perceptions and expectations respond within hours of new inflation data releases. Firm expectations are most responsive when inflation coverage in the media is elevated, suggesting a key role for the media in focusing attention on data releases. Furthermore, firms respond to changes in inflation data, but not to surprises relative to professional forecasts. This highlights a distinction between ‘Wall Street’, where financial markets respond to inflation surprises, and ‘Main Street’, where firms respond to media inflation headlines.
This version was updated in February 2025.
The speed of firm response to inflation