21  Woodford (1999) states that “one straightforward way to [ensure the effective transmission of changes in short-term policy rates so as to stabilise inflation] is to establish a reputation for maintaining interest rates at a higher level for a period of time once they are raised – or even for following initial small interest-rate changes by further changes in the same direction, in the absence of a change in conditions that makes this unnecessary.” Note the emphasis placed on conditionality at the end of the excerpt.
This is developed below. 22  Krugman (1998); Reifschneider and Williams (2000); Bernanke and Reinhart (2004). BIS Review 103/2009  5  That being said, I have always stressed that steady-handedness should not be confused with lethargy, incapacity or an unwillingness to act.