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Are Long-run Inflation Expectations Well Anchored?
Many observers anticipate that the recent run-up in inflation in the United States will prove to be temporary, and annual inflation will be near the Fed’s target of 2% in 2022 and 2023. An important consideration for policymakers, however, is whether the private sector will similarly read the rise in inflation as temporary. That is, are long-run inflation expectations likely to remain anchored, or might the sharp rise in inflation cause long-run expectations to increase substantially as well?