With a nonquadratic objective function (consistent with the importance of uncertainty for the course of monetary policy) as well as nonlinear dynamics and non-Gaussian shocks, optimal monetary policy will also be nonlinear and will tend to focus on risk management.
Policy in this setting tends to respond aggressively when a large shock becomes evident; for this reason, the degree of inertia in such cases may be markedly lower than in more routine circumstances. Indeed, as I will argue, I believe that financial disruptions of the sort that have been experienced in recent months tend to have highly nonlinear effects on the economy.