In response to the expectation that there will be a broad increase in the prices of goods and services, for example, workers may pre-emptively request higher wages and firms set higher prices. Under certain conditions, this may turn into a self-fulfilling prophecy, fuel actual inflation and make it dangerously persistent.
In macroeconomic models, the role of expectations is typically summarised by the so-called augmented Phillips curve. As is well known, while the original Phillips curve examined the relationship between wage growth and unemployment in the UK in the 1950s, later studies focused on consumer price inflation and unemployment.