This thesis includes four main chapters that are tied by the common theme of inflation expectations and inflation uncertainty in the euro area. Additionally, we assess the impact of energy prices on the formation of both inflation expectations and uncertainty. Central banks place a strong focus on ensuring inflation expectations are anchored to their inflation target. Therefore, understanding how inflation expectations are formed is important. Uncertainty with respect to the inflation outlook is also highly important and can have far-reaching impacts throughout the economy. Our first main chapter (Chapter 3) shows that the relationship between the inflation and inflation uncertainty is nonlinear. While higher inflation rates lead to rising inflation uncertainty, we show that when inflation is close to zero, there is an increase of inflation uncertainty. Therefore, the relationship between inflation and inflation uncertainty is ‘U-shaped’. We also show that both positive and negative oil price changes contribute to increased inflation uncertainty. In Chapter 4, we estimate a measure of inflation uncertainty that is common across euro area countries. We show that common inflation uncertainty shocks resemble adverse supply shocks, as inflation rises and industrial production falls across the euro area. Assessing the heterogeneity in the strength of inflation and industrial production responses, we show that the level of reliance of an economy on non-renewable energy contributes to the strength of those responses. Chapter 5 provides a stronger focus on the link between inflation expectations and oil prices. Using longer-term market-based measures of inflation compensation, we show that oil price shocks contribute to the cost of hedging inflation. However, the relationship depends on path for interest rates. At the zero lower bound of interest rates, supply and demand-driven oil price shocks significantly contribute to changes in the pricing of inflation compensation. Building on this, in Chapter 6, we decompose inflation compensation into expectations and risk premium components. We show that four types of oil price shock, labelled flow supply, flow demand, speculative demand and precautionary demand contribute to adjustments of both inflation expectations and the inflation risk premium. However, the sign and magnitude of the responses vary over time and depend on the underlying economic situation at the time of the shock.