The chart allows us to identify several episodes in which money growth gave potentially misleading signals about inflation risks. The question in these cases is whether policymakers had enough specialized knowledge about financial innovations or disturbances to make a timely judgment that the information about money growth should be 17 discounted.
So, that constellation of financing conditions should be seen as the reference point for our policy moving forward. By that metric, the steepening in the nominal GDP-weighted yield curve we have been seeing is unwelcome and must be resisted.