But we will also want to be sure that we haven’t left highly accommodative policy in place so long that economic and financial conditions become conducive to future inflation. Given the lags in the effects of monetary policy, that means we will not be able to wait until the unemployment rate is down close to its long-term level.
The conventional principles might have remained viable, had the financial industry remained static. However, innovation in financial technologies has been dramatic. It is no longer possible for a fine-meshed net of regulations to keep up with the rapidly evolving financial transactions and markets, and to ensure unaided the soundness of financial institutions.