According to Woodford (2003), “not only do expectations about policy matter, but ... very little else matters.” Even if one does not completely share this view, inflation expectations are undoubtedly a prerequisite for achieving the primary objective of many central banks nowadays: price stability in the medium term and also undoubtedly a crucial measure of a central bank’s performance and credibility.
Inflation expectations therefore closely link the success of monetary policy to its credibility; and the latter is supported if the central bank follows a systematic decision-making process, that is a rule-based policy strategy, and the general public has as clear an understanding of it as possible: in other words, monetary policy is transparent and communicated effectively.