A corollary to this principle is that the horizon for policy action cannot be set in advance, as I shall argue more extensively below. Second, a central bank can benefit from keeping an eye fixed on the single long-term compatibility condition that monetary economics has to offer to practitioners, free of model-specificities and restrictive assumptions.
Namely, that over a sufficiently extended period of time money should grow at a rate which is consistent with trend growth in real output and the central bank’s definition of price stability. In more general terms, this principle embodies the ancient wisdom of the quantity theoretic law that it is the growth of money that ultimately anchors the development of prices.