Our answer is to go after the so-called second-round effects, ensuring that inflation corresponds to the target over the medium term. First-round effects, either directly through the higher cost of imported goods or indirectly through those costs feeding into other goods and services, are relatively hard to control. Under flexible inflation targeting, we have some leeway to look through these shocks.
More generally, there is a continuing need for vigorous international dialogue and cooperation. The efforts being made by the BIS and other international fora are critical for confidence and stability in the financial systems of the world, which in turn is a key requirement for keeping the trading system open. We need to make the markets work.