This means that, for a given level of the nominal policy rate, the monetary policy stance is expected to become more restrictive over time as inflation declines. Indeed, measures of long-term inflation expectations from diverse sources – including household surveys, professional forecasters and financial market instruments – have so far remained well anchored around the 2 per cent medium-term target.
Respondents to the Survey of Professional Forecasters (SPF) repeatedly, over several rounds, expect inflation to decline steadily over the course this year and next, and to return to target in 2025 (Chart 16, right panel). The distribution of long-term inflation expectations has remained centred around 2 per cent (Chart 16, left panel).