That is, a federal funds rate that is satisfactory in times of normal market functioning may turn out be lower than required to ensure that the economy performs at potential through the horizon. Making that judgment represents an important, but difficult task for policymakers.
Second, with respect to inflation, policy can still be preemptive if it responds to incoming data on utilization rates, given the link between current utilization rates and future inflation. Of course, the degree of confidence that policymakers have in this link (and specifically in their measure of excess demand) will determine how preemptive they are prepared to be.