Central banks around the world, including the European Central Bank and the Bank of England, are facing a challenging landscape as they consider raising interest rates to combat rising inflation driven by energy price shocks from the ongoing Iran war. Policymakers are cautious, knowing that measuring inflation expectations is complex and often more art than science. They have developed new tools to assess economic behavior, such as tracking wage changes and surveying businesses directly, to fill data gaps left by traditional surveys. Since the 2022 inflation spike, consumer and business behaviors have evolved, making price-setting more dynamic. Investors now anticipate that the European Central Bank will raise rates two or three times this year and the Bank of England twice, while the Federal Reserve has shifted expectations away from rate cuts in 2026. As energy prices remain high, the potential for increased inflation expectations looms, prompting central banks to carefully navigate their decisions amidst uncertain economic conditions.