If you think back to the pre-crisis period, nobody gave much credence to the idea that focusing on price stability could somehow contribute to the buildup of dangerous imbalances. Central bankers now know that we must consider financial stability as we set policy.
Meanwhile, slower global economic growth due to the escalation of protectionist policies in advanced economies as well as geopolitical tensions, and the corona virus outbreak are the main downside risks to inflation. Equally important, inflation expectations – based on forecast surveys of private sector analysts – have remained manageable and well within the government’s target range.