This paper addresses the problem of multiple equilibria ina model of time-consistent monetary policy. It suggests that this problemoriginates in the assumption that agents have rational expectations andproposes several alternative restrictions on expectations that allow themonetary authority to build credibility for a disinflationary policy bydemonstrating that it will stick to that policy even if it imposes short-runcosts on the economy. Starting with these restrictions, the paper derivesconditions that guarantee the uniqueness of the model's steady state;monetary policy in this unique steady state involves the constant deflationadvocated by Milton Friedman.