Expected price DI has always been positive in both countries with each currently recording around 50 percent in Japan and over 80 percent in the United States. Moreover, the expected price DI continues to exceed expected income DI in both countries (Chart 5).
This change is necessary because the eclectic framework has at times created uncertainties about Reserve Bank decisions and actions which were perceived as being in conflict with the stated guidelines for the growth in money supply and bank credit extension. The question may be asked whether the adoption of inflation targeting will lead to a more effective monetary policy?