Inflation expectations play a crucial role in the decisions made by the Federal Reserve. Policymakers take them into account as they work to meet their mandate of reaching maximum sustainable employment and maintaining stable prices.Federal Reserve Chair Jerome Powell'sfor his keynote address at the Kansas City Fed's annual retreat in Jackson Hole, Wyoming, noted that inflation has come down but it still has a ways to go.
"Although inflation has moved down from its peak — a welcome development — it remains too high," Powell said."We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective." Powell indicated that more interest rate increases could be on the horizon as financial markets anxiously await to see if inflation is truly decreasing.
"My concern is there's too much confidence in the potential of how this whole inflation thing plays out," Barry Glassman, founder and president of Glassman Wealth Services, told CNBC."And, my biggest concern is that's already priced into the markets."above to learn more about how inflation expectations are measured, why the Fed cares so much about them and how consumer behavior alone can manifest higher prices.