These work together and reinforce one another to promote stability and to facilitate economic adjustment. How does this happen? Let's look first at inflation control. Low, stable, and predictable inflation provides many benefits. It helps people deal with change.
One way it does this is by allowing prices to send clear signals, which in turn help individuals and companies to make sound, long-term economic decisions. In addition, and very importantly, when inflation is contained, monetary policy can be set to keep the economy running close to capacity, acting as an automatic stabilizer, so the economy can more effectively absorb shocks.