It has become clear that there has been a steady convergence of the inflation rates of many of the categories of goods and services which make up the index to within the target range of 3-6 per cent. In the meantime, domestic monetary policy has continued to emphasise price stability and has succeeded admirably in reducing inflation expectations.
According to the Bureau for Economic Research inflation expectations survey, inflation expectations for 2006, 2007 and 2008 of all the categories of respondents (business executives, trade union officials and financial analysts) are below 5 per cent which is nicely within the inflation target range. However there are a number of unfavourable trends and risk factors.