Adaptive expectations formation  Exports, business fixed investment, private consumption, etc. Observed inflation rates  ＝  Inflation expectations  ＋  Improvement in output gap 10  Chart 11  II.
In this sense, the fall in inflation – by boosting the purchasing power of our citizens – has acted as an automatic stabiliser at a time in which the economic conditions were deteriorating. Inflation expectations are a good measure of the degree to which the free fall in the economy and the dis-inflationary process could come to feed upon itself.