This provides a framework both for interpreting economic news and for communicating our policy stance to our stakeholders so that it is more predictable over time. How, then, does the outlook appear through this lens? Page 6 of 9  As outlined earlier, the exchange rate and its long-term impact on price and wage determination remains the single biggest risk to inflation.
It is easy to fall into the trap of presuming that what an economic actor did last is what that actor will do next. Thus, market prices tend to extrapolate that changes in monetary policy cluster in the same direction. This is a rule that works often enough, but, as a look back to 1994 and 1995 reminds us, not always.