The pound-euro exchange rate at which Cyprus joined the ERM II in May 2005 remained very stable throughout the period of ERM II participation. The EU Council decided that the central parity should also become the final conversion rate of the pound to the euro.
Moreover, just two years into the disinflation process in New Zealand the Government introduced a 10 per cent Goods and Services Tax, which increased the CPI by an estimated 8 per cent. Then, in mid-1989, that tax was increased from 10 per cent to 12.5 per cent. Both moves presumably had some effect in maintaining inflationary expectations at a relatively high level.