– Tim McMahon, InflationData.com, July 14, 2006
The “baked into the cake” metaphor seems to have gotten started in the early 2000s, first among stock-market bloggers and then political talking heads. The question is: are things being dissolved into the cake batter, like sugar, flour, and baking powder? Or is there a prize being suspended in the middle, like the trinket in a king cake? If so, the “prize” is often an unwelcome consequence.
Inflation is a good thing in conventional (non-metaphorical) baking. Gas bubbles trapped in the batter give cake its air-filled texture, so it springs back when pressed lightly. But inflation is bad in financial markets. Money that is light and airy buys less than money that is heavy and dense like gold.
Either way, the sense of the expression is you are stuck with your cake as is. You not only have it, you are going to have to eat it too.