Like a self-fulfilling prophecy, when we expect a higher inflation rate, we tend to create it. Consequently, the Federal Reserve hopes to anchor our expectations at 2%. Now though, some of us expect 5% inflation. Inflation Expectations. the Past and Present. By elevating interest rates, the Federal Reserve helped to pull down the inflation rate from 7.2% to, at 2.5%, a notch above its 2% target. (Instead of the CPI, the Fed uses the Personal Consumption Expenditures Index–the PCE.) ….[READ]
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