Why is it important to distinguish between anticipated and unanticipated inflation?
Anticipated inflation is easier to offset through current actions (such as layoffs or price increases to cut expenses) than is unanticipated inflation. Our offsets can fall more in line with current market conditions AND offset the effects of inflation when anticipated. Unanticipated inflation may not enable immediate offsets and therefore may limit what offsets can be made, thereby possibly postponing offset actions. This might adversely affect short-term earnings.
