Building on rational expectations and sticky prices, inflation is driven by 1/4  BIS central bankers' speeches  expected inflation and the anticipated change in real marginal costs – the so-called NewKeynesian Phillips curve which links economic activity and inflation. In this set-up, monetary policy should aim for price stability. Doing so requires bringing aggregate demand into line with the potential output path.
The prime way to do so in these models is by steering individuals’ intertemporal choice between consuming today versus tomorrow. This gives a key role to interest rates, where the working assumption is that the central bank steers perfectly the interest rate that is relevant for the representative agent.