Inflation Expectations

What households, businesses, and investors believe inflation will be in the future — and a force that can make inflation self-fulfilling. If people expect prices to keep rising fast, workers demand bigger raises, firms raise prices preemptively, and lenders charge higher interest, all of which actually cause inflation to persist. Keeping expectations "anchored" (the public confident prices will stay stable) is one of a central bank's most important jobs, because anchored expectations let it control inflation with far less economic pain.

Related terms

10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods

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