BIS Review 107/1997  -4-  Once price stability has been achieved, monetary policy is essentially an exercise in smoothing economic cycles -- slowing the economy when it looks likely to overheat, stimulating it as activity slows. That is not a straightforward exercise. Even if we get it right, (and we won’t always) there will still be economic cycles.
But we should be able to avoid the boom/bust cycles of old. If our longer-term growth potential is around 3 percent, it is probably the case that growth outturns in the 1 percent to 5 percent range will be the norm. Occasional external shocks and surprises -- climate, international events, and so on -- may take us outside that range.