And the volatility of both inflation and interest rates has also been lower under the inflation targeting regime. The clear lesson here is that changes in the average inflation rate ultimately lead to changes in average interest rates, including those on mortgages. Today, most people take low inflation as a given, as a permanent part of our economic landscape.
Inflation expectations are well anchored and the possibility of a rapid increase in the general price level is not something that most people worry about. This is how it should be. There are enough uncertainties in today’s world, without adding uncertainty about the average rate of inflation to the list.