1-17. 6  Donald L. Kohn (2006), "Monetary Policy and Asset Prices," speech given at the European Central Bank Colloquium held in honor of Otmar Issing, March 16. BIS Review 118/2006  3  central bank would face a persistent inflation problem, one whose correction would likely require a prolonged period of tight monetary policy.
In this less comfortable world, restoring price stability can involve a painful process of slow growth and elevated unemployment. Of course, these considerations are more than a theoretical curiosity and help to explain the intense focus of central banks on inflation expectations.