(Revised September 2025)

Professional forecasters’ long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. An imperfect information model incorporating overconfidence in private information and persistent expectations bias — which generates persistent forecast errors — accounts for these two features of the data, offering a valuable tool for studying long-run inflation expectations. Our analysis highlights substantial, time-varying heterogeneity in forecasters’ responses to public information, with sensitivity declining across all forecasters when monetary policy is constrained by the effective lower bound. The model serves as a framework for evaluating, in real time, whether the inflation paths communicated by policymakers are consistent with long-run expectations remaining anchored at the central bank’s target.