How Expecting Inflation Can Actually Create More Inflation

<p>To fight historic levels of inflation, the Federal Reserve this week, once again, raised interest rates, its most powerful weapon against rising prices.</p><p>The move was intended to slow demand, but there was also a psychological factor: If consumers become convinced that inflation is a permanent feature of the economy, that might become a self-fulfilling prophecy.</p><p>Guest: <a href="https://www.nytimes.com/by/jeanna-smialek?smid=pc-thedaily">Jeanna Smialek</a>, a correspondent covering the Federal Reserve and the economy for The New York Times.</p><p>Want more from The Daily? For one big idea on the news each week from our team, <a href="https://www.nytimes.com/newsletters/the-daily?module=inline">subscribe to our newsletter</a>. </p><p>Background reading: </p><ul><li>The Federal Reserve has<a href="https://www.nytimes.com/2022/07/27/business/economy/fed-interest-rate-inflation.html"> pushed up borrowing costs</a> at the fastest pace in decades.</li><li>The New York Times<a href="https://www.nytimes.com/2022/07/27/business/economy/inflation-expectations.html"> invited readers to share their thoughts about the price rises</a> and asked how much more inflation they expected.</li></ul><p>For more information on today’s episode, visit <a href="http://nytimes.com/thedaily?smid=pc-thedaily">nytimes.com/thedaily</a>. Transcripts of each episode will be made available by the next workday. </p>