But once they level out, inflation will fall back to its previous trend in the absence of other disturbances. 24 A key implication of these two examples is that the presence of well-anchored inflation expectations greatly enhances a central bank’s ability to pursue both of its objectives – namely, price stability and full employment.
Because temporary shifts in the rate of change of import prices or other transitory shocks have no permanent influence on expectations, they have only a transitory effect on inflation.