Inflation expectations refer to the beliefs or predictions that consumers, businesses, and investors have about the future rate of inflation. These expectations can influence economic behavior, such as spending, saving, and investment decisions. When people expect prices to rise, they may spend more now rather than later, which can contribute to actual inflation. Central banks, like the Federal Reserve, monitor inflation expectations closely because they can impact monetary policy. If expectations are high, the Federal Reserve might raise interest rates to control inflation. Conversely, low expectations may lead to lower interest rates to stimulate economic growth.