Thus, the answer to the title of this speech – "Does stabilizing inflation contribute to stabilizing economic activity?" – is, for the most part, yes. A key policy recommendation from the past three decades of research in monetary economics is that monetary policy makers must always keep their eye on inflation and emphasize the importance of price stability in their actions and communications.
Doing so does not mean that monetary policy makers are less concerned about stabilizing economic activity. Rather, by appropriately focusing on stabilizing inflation along the lines I have outlined here, monetary policy is more likely to better stabilize economic activity. References Anderson, Palle, and David Gruen (1995).