The last time this happened was in 1951, more than 70 years ago. In this new environment, households and firms can no longer afford to ignore inflation. Everyone is worried about their next gas and electricity bills and rising food prices. In other words: Inflation leaves the zone of “rational inattention” and snaps into the focus of attention.
[3] When prices soar across the board, households and firms will adjust their behaviour. [4] Workers will push harder to regain their lost purchasing power, demanding higher wages. Firms will try to compensate for lost profit margins by raising prices. Typically, contract terms will then become shorter and price adjustments more frequent.