# 'Anchors' for REER/PPP estimates

I'm having trouble trying to understand the concept of 'anchors'. I came across the term in a sentence that said "we use a relative purchasing power parity approach that is based on the longterm average of a currency’s real exchange rate as a fair value anchor." (form J.P Morgan, page 66).

Also, in a separate report the following formula was given:

The formula was described as "an estimate that is obtained by using 10-year PPP averages as anchors and adjusting by expected bilateral inflation differentials."

Sorry if this seems like a silly question!