At that point, do you raise interest rates to control inflation, or lower rates to encourage growth and jobs?10 History and economic theory tell us that we need to be resolute to bring inflation down, but we may need to bring inflation back to target over a reasonable horizon so as not to unnecessarily impede maximum sustainable employment.
The second part of the trade-off is how far and how fast do we go to rein in inflation without creating a worse outcome overall? We need to have regard to other principles such as financial stability, unnecessary volatility in economic output, interest rates and exchange rates, and we need to have regard to the efficiency and soundness of the financial system.