The control of inflation expectations is primarily related to which aspect of a central bank?

The control of inflation expectations is closely tied to the credibility of a central bank. When a central bank has established credibility, it means that the public trusts its commitment to maintaining price stability and managing inflation effectively. This trust influences how consumers and businesses set their expectations for future inflation.

If a central bank is viewed as credible, people are more likely to believe that it will take necessary actions to keep inflation in check, which helps anchor their expectations. For instance, if the central bank signals that it aims to keep inflation at a target level, the public will adjust its expectations accordingly. This adjustment can influence wage negotiations, price-setting behavior, and ultimately actual inflation rates.

On the other hand, if a central bank lacks credibility—perhaps due to a history of inconsistent policies or missed inflation targets—public expectations may become unanchored. In such cases, even small increases in inflation could prompt people to expect further inflation, leading to a self-fulfilling cycle that can complicate the central bank's ability to achieve its goals.

While transparency, accountability, and willingness to communicate are also important traits for central banks, they do not directly focus on how the public perceives the bank's effectiveness and commitment to maintaining price stability, which is at the heart of