The Role of Inflation Expectations

One of the most dangerous elements of a currency crisis is an inflation-expectations spiral.

Suppose consumers believe prices will rise next month.

They may accelerate purchases today.

Businesses may increase prices today because they expect their replacement costs to rise tomorrow.

Workers may demand higher wages because they anticipate inflation.

Employers may raise prices to cover higher wage costs.

The cycle can reinforce itself.

Currency depreciation can intensify this process because imported goods and production inputs become more expensive.

This is why stabilizing expectations is one of the most important challenges for Iranian economic policymakers.

August 25, 2026 | 9:11 am