However, the 1970s saw the emergence of a combination of high inflation and low growth - ‘stagnation’ as it came to be called - and the standard Keynesian analysis was hard put to explain that phenomenon. Consequently, monetary policy re-emerged as an instrument of economic policy particularly in the fight against inflation.
Issues relating to the conduct of monetary policy came to the forefront of policy debates in the 1980s. The relative importance of growth and price stability as the objective of monetary policy as well as the appropriate intermediate target of monetary policy became the focus of attention.