The Bank’s baseline scenario for economic activity and prices is to achieve the price stability target under a virtuous cycle similar to that during the 2003–2006 period. The current QQE policy, together with cumulative effects since the period of comprehensive monetary easing, will further strongly support such a baseline scenario from the financial side.
In part, this principle just reflects sound statistical inference – one doesn’t want to put too much weight on one or two noisy observations. But there is more to it than that. Not only do FOMC actions shape market expectations, but the converse is true as well: Market expectations influence FOMC actions.