Fifth, as inflation rises and turns volatile, it raises the inflation risk premia in financial transactions. Hence, nominal interest rates tend to be higher than they would have been under low and stable inflation. Sixth, if domestic inflation remains persistently higher than those of the trading partners, it affects external competitiveness through appreciation of the real exchange rate.
The financial crisis and its lessons for monetary policy  The crisis has brought the “monetary policy consensus” formed in the years prior to the crisis under scrutiny.2 The framework of monetary policy differed significantly from one central bank to another.