Inflation expectations remain stable amid economic uncertainty.
Understanding Anchored Expectations
Inflation expectations refer to public forecasts about future price levels. When these expectations are “anchored,” they remain stable and predictable.
Anchoring is crucial for economic stability, as it influences spending, investment, and wage-setting decisions.
Implications for Monetary Policy
Central banks closely monitor inflation expectations. Anchored expectations make it easier to control actual inflation through policy tools like interest rates.
Unanchored expectations can lead to wage-price spirals, requiring more aggressive and potentially disruptive policy responses.
