Part 9/12:
A significant risk exists that higher prices could prompt workers to demand higher wages, setting off wage-price spirals that could entrench inflation. Nonetheless, current labor market conditions—marked by a softening supply and demand—make such a scenario less likely in the near term.
Inflation expectations, as measured by market and survey data, remain broadly anchored around the 2% target. Yet, the Fed emphasizes vigilance; a one-time increase should not translate into persistent inflation, and proactive measures will be taken to prevent expectations from becoming de-anchored.