What is anchoring inflation anticipation?

Anchoring inflation anticipation refers to the process of establishing and maintaining stability in the expectations about future inflation among economic agents. When inflation expectations become anchored, it means that individuals, businesses, and financial markets have confidence that the central bank will effectively control inflation within a target range. This confidence is crucial because it helps shape economic behavior and decision-making, influencing factors such as investment, wages, and pricing decisions. Anchoring inflation anticipation is often achieved through clear communication and credibility-building measures, such as consistently meeting inflation targets, implementing credible monetary policy frameworks, and maintaining independence of the central bank.

This mind map was published on 26 September 2023 and has been viewed 51 times.