In this setting, we can’t hit our inflation target precisely or continuously – and we don’t try to. To illustrate, consider what would happen if we raised our policy rate mechanically whenever inflation was above target and lowered it whenever inflation was below target. We would end up reacting to a lot of temporary factors.
And because our policies work with long lags, we would have to overreact, making huge adjustments in our policy rate to have any effect, followed by huge corrections to compensate for the lagged effects of our own policies. This would lead to what has been called “instrument instability” – a kind of policy over-steering that would quickly land us in the ditch.