Indeed, if inflation expectations depend not only on current inflation, but also on average inflation in an earlier, higher inflation, regime, a large and persistent shock, such as a negative energy supply shock may well lead economic agents to raise their expectations that the monetary authority will shift to a higher inflation regime17.
Mark Carney: Some current issues in financial reform Remarks by Mr Mark Carney, Governor of the Bank of Canada and Chairman of the Financial Stability Board, to the Canadian Club of Montréal, Montréal, Quebec, 8 November 2012.