2  BIS Review 10/2004  This is an appropriate moment at which to deal with an argument which is sometimes heard, that our 2-3 per cent average inflation target means that we should tighten policy if, but only if, our forecast for inflation exceeds 3 per cent.
By the same logic, we should ease policy if, and only if, the forecast is less than 2 per cent. This interprets the 2-3 per cent specification not so much as a target to be achieved on average, as a zone of inaction for policy: do nothing until a trigger point is reached, regardless of the level of interest rates currently in place.