This is because inflation expectations are inherently difficult to measure accurately and are susceptible to downward shifts once low inflation is observed for a certain period of time (i.e. inflation expectations are formulated in an adaptive manner). We should be careful not to confuse the benefits of falling prices with necessary relative price adjustments.
We need to maintain our credentials as deflation fighters as much as inflation fighters by showing clear and unequivocal commitment to overcoming deflation; should these credentials be lost, experience suggests that they are extremely difficult to regain. Furthermore, it is crucial that we show a ‘‘whatever-it-takes’’ stance to prevent inflation expectations from falling in the face of negative shocks.