In policy-making regimes that feature a primary, sharplydefined objective – reinforced by a precise numerical definition of the central bank’s notion of price stability – the likely evolution of the economy vis-à-vis that objective gives clear indications as to the most likely future stance of policy. This is supposed to diminish the odds that expectations might start diverging in the first place.
8  BIS Review 112/2009  I am pleased to note that the relevant authorities have already started to take action in response to all these lessons that have been learnt from the financial crisis.