Moreover, with expectations of inflation anchored, real shocks arising from various channels – whether from aggregate demand, energy prices, or the foreign exchange rate – will also have a smaller effect on expected inflation and hence on trend inflation.
The presence of a strong commitment to a nominal anchor in many countries – that is, the use of monetary policy actions and statements to maintain low and stable inflation – helps explain why even sizeable depreciations of the nominal exchange rate have exerted small effects on consumer prices in many recent historical episodes and can be expected usually to exert small effects in future episodes.