As a result, the Fed has not had to raise interest rates sharply as it did in the 1970s but instead has been able to pursue a policy that is more gradual and predictable. Of course, the relatively benign state of inflation expectations we enjoy today has not come automatically.
The anchoring of inflation expectations in a narrow range has been the product of Fed policies that have kept actual inflation low in recent years, clear communication of those policies, and an institutional commitment to price stability. Price stability also contributes to the third component of the Fed's mandate, the objective of moderate long-term interest rates.