We must prevent the difficulties of reaching agreement among such different approaches from resulting in the adoption of accommodating standards and supervisory practices – a sort of lowest common denominator.
This is an important distinction, as it provides a mechanism that enables monetary policy to stimulate the economy even if nominal interest rates hit their zero lower bound. Indeed, an expansion in the money supply can raise expected inflation, thus lowering the real interest rate and providing further stimulus to the economy through the interest rate channel.