Inflation expectations refer to the anticipated rate of inflation in the future. It is the perception of consumers, businesses, and investors about the likely direction of prices in the economy. Inflation expectations play a crucial role in shaping the behavior of economic agents, as they influence decisions related to spending, saving, investment, and borrowing.

Inflation expectations can be influenced by a variety of factors, including changes in monetary policy, economic growth, commodity prices, exchange rates, and geopolitical events. They can also be affected by psychological factors, such as consumer confidence, trust in government institutions, and media coverage.

Central banks closely monitor inflation expectations as they are a key determinant of actual inflation outcomes. If inflation expectations become unanchored, meaning that they become disconnected from the central bank's inflation target, it can lead to higher inflation and potentially undermine the credibility of the central bank. Therefore, central banks often use communication tools, such as forward guidance and inflation forecasts, to influence inflation expectations and anchor them to their target.