As we know, commercial banks have to put aside a certain amount of deposits at the central bank as required reserves. Cutting the RRR thus increases commercial banks' excess reserves and allows them to lend more.
But, at the present juncture, the question we should be asking ourselves is not so much “why have we returned to price stability?”, but rather “how did we lose it in the 1970s?”. One element of the explanation that comes immediately to mind is the misconception that there is a permanent trade-off between inflation and output.