The expectations of business, trade unions and households are now well within the target levels. This is important for inflation outcomes going forward. In an inflation targeting monetary policy framework, it is important that we are committed to the inflation target and not target any other intermediate variable.
The Bank continues to judge that the economy is operating slightly below its production capacity, and we expect that it will move back to full capacity in the second half of 2006. Core inflation is projected to return to 2 per cent around the end of 2006.