Indeed, as I have argued elsewhere, a commitment to a strong nominal anchor is crucial for both aspects of the dual mandate, that is, for achieving maximum employment as well as for keeping inflation under control (Mishkin, 2007b). How can a central bank keep inflation expectations solidly anchored so it can respond preemptively to financial disruptions?
The central bank has to have earned credibility with financial markets and the public through a record of previous actions to maintain low and stable inflation. Furthermore, the central bank needs to clearly indicate the rationale for its policy actions.