With returns on bank reserves nearing zero and higher rates on government securities during the improvement, conventional monetary policy would regain effectiveness. In such a case, fighting inflation would require selling short-term government securities to reduce bank reserves.
Let me quote Richard again: “We central bankers deal with uncertainty, but we are obliged before society to a rigorous and disciplined handling of clarity in order to give as many certainties as possible.” This phrase is a gem of a message that should apply forever in central banking. Quite a legacy from our honored guest.