Outgoing Atlanta Fed President Raphael Bostic said, at a live event on Tuesday: The longer the country is not at the target rate of inflation, the more likely it is they’ll give up on the idea we will reach it.

So how do we know at what point we’ve been away from ideal inflation for so long that we’re stuck there?

You know how in “Star Wars: The Empire Strikes Back,” Luke is trying to raise his space ship out of a swamp and then Yoda uses the Force and does it no problem? Luke says, “I don’t believe it!” Yoda responds: “That is why you fail.”

This is a common trope in movies, the idea that believing in something, or not believing in something, makes that something happen, or not happen. Inflation is like that.

“You can have a self-fulfilling prophecy,” said Yuriy Gorodnichenko, a professor of economics at University of California, Berkeley. “If you want to buy a car and you think inflation is going to be high in the future, you should be willing to buy this car, now, rather than later.”

And if everybody does that, then the price of that car goes up.

“Expect prices to be higher, and end up with higher prices,” Gorodnichenko said.

Right now, consumers expect high inflation. They think, on average, inflation will be 6.5% in a year and 7.2% in five to 10 years, according to the Michigan Survey of Consumers.

“That is really, really high. It is relatively easy to create this self-fulfilling prophecy,” Gorodnichenko said.

The only thing holding consumers back from getting out there and buying stuff and kicking off a vicious cycle is uncertainty about the economy, Gorodnichenko said. 

But there is a wrinkle in all of this, which is that we consumers, turns out, are usually very bad at predicting inflation.  

“Consumer expectations haven’t been anchored at the 2% inflation target for the last four-and-a-half decades,” said Michael Weber, a finance professor at Purdue University. 

He said the spark for a self-fulfilling inflation prophecy isn’t the number inside consumers’ brains. It’s whether that number is changing inside their brains. 

And right now it is.

“Inflation expectations keep coming down,” he said.

So we might not know where we are, but we have better sense of where we’re headed. And if you look at it that way, we should be headed for lower inflation.

But a vicious inflation cycle that can throw all that up in the air is only ever a few painful grocery bills away.

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