How inflation expectations affect the economy

2024-12-23 22:18:25 source: category:Invest

The Fed's dual mandate of managing unemployment and inflation is often likened to steering a ship on the high seas: huge economy, tough conditions, limited control. And usually, one of the things making it easier is its predictable two percent inflation target, which anchors consumers' and businesses' inflation expectations. (Pun intended.)

Recently, though, that anchor has seemed less ... anchored. That can become a self-fulfilling prophecy — when people's inflation expectations rise, actual inflation soon follows. Today, we board a pirate ship to find out why, and how to fix it.

Music by Drop Electric. Find us: Twitter / Facebook / Newsletter.

Subscribe to our show on Apple Podcasts, Spotify, PocketCasts and NPR One.

For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org.

More:Invest

Recommend

John Krasinski is People's Sexiest Man Alive. What that says about us.

John Krasinski is People's "Sexiest Man Alive." I, for one, couldn't be more pleased.So when multipl

How the Fed got so powerful

"The limit does not exist!" Years after Cady Heron famously won the mathlete championship in the

Has JPMorgan Chase grown too large? A former White House economic adviser weighs in

The Federal Deposit Insurance Corp. (FDIC) says the government might want to reconsider the size of