In other words, if an increase in demand for goods and services leads to a rise in market prices, this may induce firms to raise their sales prices. This situation is more likely to occur if a sustainable expansion of the domestic market is projected. In addition, firms may reflect more adaptive expectations than households when forming inflation expectations.
For example, it should be noted here that about 50–70 percent of firms’ inflation expectations is allocated to adaptive expectations and about 50–30 percent to rational expectations.13 Hence, the actual and past price performances may be the most important element in raising firms’ inflation expectations to achieve the 2 percent target, while at the same time, a deeper understanding of the QQE framework could also be of help.