According to the Bank’s Business Outlook Survey, inflation expectations remain steady, with almost all firms expecting CPI inflation to be within the Bank’s 1 to 3 per cent inflation-control range over the next two years, and the majority expecting inflation to remain in the bottom half of that range, consistent with the Bank’s basecase projection.
In response to the claim that the Fed’s easy money policy was a significant contributory factor to the crisis, Bernanke argued that the Fed’s relatively easy stance was justified by the fact that inflation forecasts were trending significantly downward, while Taylor rebutted saying that actual inflation rates and not forecasts were the appropriate inputs into the formula.