The possibility of letting inflation temporarily drift down within its price stability range when faced with clear signs of financial exuberance increases the chances of hitting the inflation objective over the long run. The latter type of discretion – related to the time horizon – is crucial in the presence of transitory negative supply shocks and demand shocks.
Just like the eagle on a prey, we need to sharpen our senses – we need to be sensitive to the signals around us – sights sounds and scents. We need to be aware not only of our immediate surrounding but also of what may lie around. We need to not only be presentthinking but forward-looking also. You can’t be complacent.