I have my doubts. Despite the horror scenarios evoked in some quarters, the risk of a self-reinforcing spiral of falling wages and prices – of deflation, in other words – is very low, a view shared by the vast majority of the Governing Council members.
The need for flexibility The purpose of a hierarchical mandate is to impose constraints on the operation of monetary policy, constraints that proponents believe enhance credibility, focus policy on what monetary policy can achieve, and reduce political pressures for policy to aim at impossible-to-achieve and potentially destabilizing output goals, such as a level of output above the economy's maximum sustainable rate.