Looking ahead, favorable corporate profits and an increase in wage growth, if sustained, may improve households’ tolerance to price rises, thereby helping to correct households’ upward bias. Once that happens, firms may be gradually more willing to change their cautious price-setting behavior. Against this backdrop, I feel that a policy to raise average inflation is relatively more challenging than to lower inflation.
On this front, a lesson can be learned from the U.S. experiences of an anti-inflationary policy through bold monetary tightening adopted by then 4  BIS central bankers’ speeches  Federal Reserve Chairman Paul Volcker in the late 1970s to the early 1980s. At that time, until around 1983 economic recession caused a continuous decline in households’ expected income DI over the next year.