That flexibility could entail doing more to ease credit if the economy proves resistant to the monetary and fiscal stimulus now in train, or it could involve reversing actions to forestall potential inflationary effects of past actions, as I will discuss in a moment.
In gauging the effects of market interventions in the current crisis, one approach is to look to the size of increases in the quantity of reserves and money to judge whether sufficient liquidity is being provided to forestall deflation and support a turnaround in growth – an approach often known as quantitative easing.