In order to address the inflation surge and the accompanying economic stagnation, intellectual opinion swung in favour of price stability supported by the work of economists like Milton Friedman, which advocated a dominant role for monetary policy.4 Thus, price stability emerged as a primary objective of most central banks during the 1980s. How did financial stability fit into this framework?
More details on the decomposition procedure can be found in the appendix. -4continue to come in on the low side in coming years. 4 Some of the recent decline in inflation, although not all, reflects idiosyncratic shifts in the prices of some items, such as the large decline in telecommunication service prices seen earlier in the year, that are unlikely to be repeated.