Description

Inflation illiteracy—the inability to select and process relevant inflation information and form meaningful expectations—affects economic outcomes. This note analyses microdata for Greater Santiago, Chile, linking one-year ahead inflation expectations to socioeconomic, demographic, and macroeconomic factors. Individual-level expectation-formation models and binary-outcome regressions show that higher education lowers inflation expectations, while women re-port systematically higher levels, and age exhibits a mildly U-shaped relationship. Expectations rise with individuals’ own growth outlook, but fall with realised growth and higher wages, while inflation, housing costs, and credit con-ditions push them upwards. Inflation illiteracy raises expectations, weakens the moderating effects of education and income, and is more prevalent among lower socioeconomic groups, less educated individuals, and women, particularly under adverse macro-financial conditions. These findings highlight the importance of targeted communication and financial-literacy policies to reduce inflation misperceptions.