We had expected our core rate of inflation - which strips out the eight most volatile components of the consumer price index, as well as the effect of changes in indirect taxes on the remaining components - to decline below the 2 per cent target. In fact, that happened earlier than the Bank had anticipated.
Our core inflation measure is likely to decline somewhat further in the next few months. And we see the trend of inflation remaining below the 2 per cent target for some time. As I’ve said, part of this lower trend in inflation is a result of the slack in the economy that has opened up in 2003.