If wages and prices are set on the basis of such expectations, inflation will remain higher and the job of monetary policy that much more difficult. 4. Domestic Output and Expenditure  Domestically, 2002 was a relatively good year for economic growth.
In normal times, when it is working well, the government bond market reflects what investors think about the economy and future interest rates. But when the market isn’t working well, it makes it harder to price other assets.