Inflation Expectations

Inflation expectations refer to how people, businesses, and investors anticipate future inflation rates—the general rise in prices over time. If people expect higher inflation, they might demand higher wages or raise prices now to keep up, which can itself contribute to inflation. Conversely, if they expect prices to stay stable or fall, they may be less inclined to increase spending or prices. These expectations influence economic behavior and can impact actual inflation outcomes. Central banks monitor these expectations to help set policies aimed at maintaining stable prices and supporting economic growth.