We don't control inflation with interest rates; we do some economic theatre with interest rates that some people believe controls inflation in a predictable way.
It's not a perfect control system because the cost is "NAIRU": non accelerating rate of unemployment. That is, economic growth and wage growth are constrained to avoid a wage-price spiral. And sometimes you get a shock from outside the system.
Japan had the lowest inflation of any major economy post COVID, and yet persisted with essentially a ZIRP. There's a good argument that in our high reserves world, interest is actually inflationary.
It's a ""plant"" in the https://en.wikipedia.org/wiki/Control_theory sense.
(my original comment: "you can see in the historical data when central bank targeting was introduced that the inflation rate drops fairly rapidly into the target band".
The US graph is similar https://www.macrotrends.net/global-metrics/countries/usa/uni... - although the adoption of inflation targeting wasn't fully formalized, it was definitely used in setting interest rates from the 90s.
All feedback/control systems are like that.
(It's worth noting that even with the assumption of the models used being useful, the spread on those inflation rates is wild).
Here's what actually happened: https://www.ons.gov.uk/economy/inflationandpriceindices/time...
It very rapidly hit the bottom end of the prediction range before jumping up again pretty high. All that time interest rates were held constant and low.
Given they claim feedback lags of two years or so, one wonders what the point of all this is... (one cannot run a control loop with control lags substantially longer than the time constant of the system; that's basically the recipe for an unstable control system, assuming of course the control system is doing anything).
There's an argument that it's inflation expectations that matter, but there are dissenters within the temple that disagree: https://www.federalreserve.gov/econres/feds/files/2021062pap...
How's that working out with Turkey?
Turkey couldn’t have serviced their debt with rising interest rates and continued government spending on expansion.
Being inflation averse makes sense when you can’t reasonably make use of funds. It’s not clear how much of that is actually related to the business cycle and how much is related to MMT, regardless of what adherents would have you believe.
They've tried just about anything (except unrestrained foreign immigration or forced breeding) to jump start the economy but nothing has worked.
Inflation is effectively zero...
As a counterfactual: if you can print arbitrary amounts of money without raising inflation, you can just gradually buy up all the assets in the world with newly printed money. As far as I can tell, the Japanese central bank does not own the US stock market or all the gold in the world or all bitcoin etc, yet, so they haven't printed enough money.
Btw, what makes you think Japan is a 'steady state economy'? https://fred.stlouisfed.org/series/NYGDPPCAPKDJPN says their real GDP per capita grew fairly steadily over the years. It's just the price level that has been relatively steady, but if that's your yardstick, than just about any economy that used to be on a gold standard would also fit that idiosyncratic definition.
This rapidly falls apart when you try to actually calculate it. Whose income do you use? Is inflation lower for doctors than burger flippers? What do you use as the retirement age? Does inflation go down if the retirement age is raised? What counts as "survive"? Does that mean the price of smartphones don't count toward inflation because you can theoretically survive without them?
Sticky prices are only important, when expectations are invalidated.
So to fix your sentence:
> If wages are stickier than expenses, then the gap between wages and expenses will represent recent unexpected inflation to some degree.