Knowra Inflation expectations Inflation expectations Inflation expectations are beliefs about the future rate of price increases. They influence wage negotiations, price setting, interest rates, and decisions about spending and saving.
Phillips curve : A model linking inflation to economic slack and, in some versions, expected inflation. Expected inflation helps explain why inflation can persist even as unemployment changes.
Inflation targeting : A monetary policy framework in which a central bank publicly aims for a specified inflation rate. A credible target can give households and firms a reference point for expected inflation.
Inflation : A sustained increase in the general price level that reduces the purchasing power of money. Expectations concern the future path of this broad price increase.
Expected inflation : A forecast of future inflation, often expressed as a rate over a specified time horizon. It is a common synonym, while “inflation expectations” can also denote the broader beliefs and measures.
Menu costs : The costs firms incur when changing prices, such as updating labels, catalogs, or systems. Expected inflation can affect whether firms find it worthwhile to revise prices sooner.
Wage-price spiral : A feedback process in which rising wages and prices each contribute to further increases in the other. Workers and firms may build expected price increases into wages and prices, reinforcing inflation.
Monetary policy : Central-bank actions that influence interest rates, credit conditions, and the money supply. Policy changes can shift expected inflation by altering demand and signaling future intentions.
Consumer price index : A statistical measure of changes in prices paid by households for a basket of goods and services. Many forecasts and surveys define expected inflation using a consumer price index.
Inflation forecast : A quantified prediction of future inflation produced by a person, institution, or model. A forecast is a stated prediction; expectations also include beliefs implicit in decisions and market prices.
Money illusion : The tendency to interpret nominal monetary amounts without fully accounting for changes in purchasing power. It can lead people to respond imperfectly when inflation expectations change real values.
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