Would it be desirable, therefore, to raise the trend rate of growth? Yes. Can monetary policy accomplish this worthy task? No. Can the Congress and the Administration, through judicious combination of deficit reduction and saving and investment incentives, raise trend growth (at least for a while)? Yes. Are there opportunities for monetary policy to BIS Review 48/1997  -5-  contribute to steady growth?
Yes. First, to the extent that policy can avoid a cyclical rise in inflation, it can avoid the subsequent monetary policy response to limit and then reverse the rise in inflation; the result of avoiding the boom is avoiding the bust. Disciplined monetary policy therefore encourages steady growth, with the emphasis on the steady.