The inflation-targeting framework adopted in February 2000 has contributed to the reduction of inflation to low levels. For the past 32 months, CPIX inflation (i.e. headline inflation excluding mortgage interest cost) has remained within the target range of 3-6 per cent, despite strong output and expenditure growth in the economy, and significantly higher international oil prices.
Furthermore, there is evidence that inflation expectations have become entrenched at levels consistent with the target. These developments have allowed for nominal interest rates to fall to levels last seen in the late 1970s.