Inflation is likely to move in this direction because of declining food inflation, our policy communications, the stronger exchange rate, and the sensitivity of price and wage setters to weak economic conditions. If we can keep inflation lower, anchoring inflation expectations, that should in turn generate a lower rate of interest to support the economy.
Unfortunately, we also have to worry about higher inflation if things go wrong – that is, if the exchange rate begins depreciating again, if wage settlements are excessive, or if our monetary policy communication isn’t heard, loud and clear.