When an economy experiences a large, temporary inflation shock (such as a sudden spike in global energy or agricultural prices), central banks look past the initial price shock and focus on preventing Second-Round Effects.
The Wage-Price Feedback Loop
[Temporary Supply Shock Spikes Prices] 
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           v
[Workers Experience Lower Real Wages] --------> Drives demands for nominal pay hikes
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           v
[Corporations Grant Wage Increases] -----------> Increases internal corporate overhead costs
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           v
[Companies Raise Final Consumer Prices] -------> Triggers second-round wage-price spirals

If workers demand higher wages to cover temporary cost increases, and corporations respond by raising consumer prices to protect profit margins, a self-fulfilling Wage-Price Spiral can develop. This feedback loop embeds inflation into the domestic economy, requiring restrictive interest rate hikes to cool demand and anchor pricing systems.
 
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