However, when longer-term inflation expectations are firmly anchored, an adverse cost shock is likely to have only transitory effects on actual inflation; hence, there may be no need to raise interest rates aggressively to keep inflation from moving upward. Thus, the commitment to a nominal anchor can help reduce output and employment fluctuations that impose unnecessary hardship on workers and, more broadly, the economy.
The bottom line is that a transparent and credible commitment to an explicit numerical inflation objective can provide significant benefits in facilitating the central bank's task of stabilizing both economic activity and inflation as well as fostering the stability of the financial system. 9  Goodfriend (1993). 10  Mishkin (2008b). 11  Mishkin (2008a).