There may be some truth in this for the short-term but it is easy to prove that a continuing expansionary monetary policy will eventually lead to an acceleration in the rate of inflation. A little bit of inflation once started can easily gain momentum, get out of control and develop into hyper-inflation.
It is also true that with modern electronic forecasting techniques and increasing sophistication in the role of rational expectations, the effective period for the trade-off has become very short. 4. How does the Reserve Bank achieve financial stability? Inflation is a monetary phenomenon, i.e.