Through their control over the amount of bank reserves in the financial system and short-term interest rates, central banks can influence the balance of demand and potential supply, and their actions may also have direct effects on inflation expectations over time. Over the long run, the central bank has full responsibility for determining the economy's average rate of inflation.
How the forces of demand, potential supply, and expectations interact has probably not been changed in any fundamental way by the recent trend of globalization. To be sure, the integration of newly industrializing economies into the global trading system is exerting downward pressure on costs and prices.