Thus, the central bank needs substantial insulation from political pressures to execute policy: An independent monetary authority is less tempted to make policy for the short term, such as boosting output or refinancing national budgets, at the expense of long-run objectives.
Both outcomes are caused by weak demand, which should worry us equally in both cases. Both have inflation 2 percentage points lower than anticipated – which means that income and wealth are behaving differently to people's expectations. That is disruptive and is of equal concern in each case. In both cases, the outcome is, of course, cause for action to expand demand.