The Daily

How Expecting Inflation Can Actually Create More Inflation

Jul 28, 2022

Jeanna Smialek, a New York Times correspondent specializing in the Federal Reserve and the economy, dives into the complex world of inflation. She discusses how rising interest rates aim to curb consumer spending while highlighting the psychological aspect of inflation expectations. Smialek explains how consumer beliefs can create a self-fulfilling prophecy, impacting spending habits and demand. She emphasizes the importance of public perception and adaptive behaviors in the face of rising prices, offering a compelling look at the interplay between economics and everyday life.

28:41

Creator website

Episode guests

Jeanna Smialek

Highlights

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Episode notes

The Second Behavior That Contributes to Inflation Going Down?

01:00

Intro

3min

The Self-Fulfilling Prophecy of Inflation Expectations

5min

Consumer Choices and Inflation

10min

Navigating Inflation's Impact

7min

Navigating Inflation: The Role of Perception and Economic Momentum

3min

Recent Political Developments and Policy Shifts

3min

To fight historic levels of inflation, the Federal Reserve this week, once again, raised interest rates, its most powerful weapon against rising prices.

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.

Guest: Jeanna Smialek, a correspondent covering the Federal Reserve and the economy for The New York Times.

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Background reading:

The Federal Reserve has pushed up borrowing costs at the fastest pace in decades.
The New York Times invited readers to share their thoughts about the price rises and asked how much more inflation they expected.

For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

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