Indeed, if I accept the authors’ assertion that post-1984 expectations have been a lagging indicator of the trend, then, when expectations rise and stay elevated, I should weight that observation heavily, not lightly. Policy cannot be conducted based solely on such a lagging or coincident indicator of inflation, but, of course, it is not.
We pay close attention to those factors that are influencing the outlook for inflation, as for example, the level of resource  2  BIS Review 23/2007  utilization highlighted in our recent announcements. But a clear lesson of the 1970s is that a central bank must keep a very close eye on sustained movements in inflation expectations.