<p>The <strong>expected rate of inflation</strong> is a forecast of future inflation, based on market expectations and economic indicators. It's a key concept in macroeconomics, reflecting the general consensus among investors, consumers, and businesses about how prices will change over time.</p>

<h2>How It Works</h2>
<p>The expected rate of inflation is typically measured using inflation-linked bonds, such as Treasury Inflation-Protected Securities (TIPS). The difference in yield between these bonds and conventional bonds is often used as a market-based estimate of expected inflation. Additionally, surveys of professional economists and investors, like the Wall Street Journal's Economic Forecasting Survey, provide another method to gauge expected inflation.</p>

<h2>Why It Matters</h2>
<p>Expected inflation plays a crucial role in economic decision-making. It influences investment, savings, and borrowing decisions. For instance, a high expected rate of inflation might encourage businesses to invest in new projects to keep up with rising costs, or consumers to save more to maintain their purchasing power. Conversely, a low expected rate of inflation might discourage savings and encourage borrowing, as the real value of debt is expected to decrease over time. Central banks also use expected inflation to guide monetary policy, aiming to keep actual inflation close to their target rate.</p>