The policy framework is forecast-based, with a medium-term outlook that primarily guides the Bank’s response to anticipated movements in inflation, while taking account of prospects for economic growth. Central to the forecast is an assessment of the prevailing gap between long-term trend output and actual output as a leading indicator of inflation. It is recognised that other factors also contribute to inflation.
These other factors include foreign inflation, exchange rate movements, changes in domestic administered prices and taxes, as well as expectations of future price movements.