Inflation Expectations

Inflation expectations mean what people, businesses, and investors think inflation will be in the future. In simple terms, inflation expectations show what people believe will happen to prices. Inflation expectations are important because they can influence wages, prices, interest rates, and central bank decisions. If people expect high inflation, workers may demand higher wages and companies may raise prices. For example, if consumers believe prices will rise quickly next year, they may change how they spend, save, or negotiate wages. Inflation expectations are not the same as current inflation. They are beliefs about future inflation, not a measurement of prices today.