And this is the fundamental reason why the adoption and public announcement of a quantitative definition of price stability (or an operational inflation objective), the credible commitment of the central bank to this objective, and the effective communication of its policy decisions aimed at achieving this goal are crucial for the anchoring of inflation expectations to price stability.
Our own experience and the track record of the ECB since 1999 have been very positive in this respect: despite the fact that the ECB, as a newly created central bank, did not have a previous track record of successful policy-making, financial markets immediately understood the ECB’s commitment to price stability as credible and factored it in their expectations.