At the current juncture, however, with inflation in the euro area having reached a record high and inflation risks still on the upside, there is the concrete risk that longer-term inflation expectations will start creeping up more strongly. The experience of the Great Inflation demonstrates that a stability-oriented central bank is well-advised to fight the risk of broad-based second-round effects decisively and proactively.
Inevitably, there was a bubble which burst when house prices slumped characterizing a classic Minsky moment – euphoria leading to panic and then to collapse. 28. Here in India, the Reserve Bank, under the leadership of my predecessor Dr. Y.V. Reddy, behaved responsibly.