In the same way that expectations of much higher inflation can drive a cycle of ever-increasing inflation, when expectations are “anchored” and don’t move significantly, it can have the effect of helping moderate surges in inflation, such as the one we have seen over the past year.
We expect CPI inflation to fall to around 3% in the middle of this year and reach the 2% target in 2024. Needless to say, there are risks around this projection. The biggest near-term risk is that global energy prices could increase, pushing inflation up globally.