The Central Bank's Goal of Anchoring Inflation Expectations
Central banks focus keenly on inflation expectations because they are a key driver of future inflation. Unanchored expectations can cause the Phillips curve to shift upward, leading to a self-perpetuating inflationary process. Therefore, a primary policy objective is to 'anchor' these expectations to a stable, low inflation target, which helps maintain overall price stability and makes the central bank's job easier.
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