The viability of this approach – and its efficiency – is enhanced when the central bank operates within a clearly defined institutional framework.
In policy-making regimes that feature a primary, sharplydefined objective – reinforced by a precise numerical definition of the central bank’s notion of price stability – the likely evolution of the economy vis-à-vis that objective gives clear indications as to the most likely future stance of policy. This is supposed to diminish the odds that expectations might start diverging in the first place.