First, monetary policy cannot enhance the trend growth rate of productivity and potential output. A loose monetary policy would just create high inflation and inject volatility into the economy. On the contrary, a monetary policy geared to delivering low and stable inflation contributes to creating a favourable macroeconomic environment for employment creation and investment decisions.
Price stability reduces interest rate premia, and thus the cost of capital, and allows wage and price-setters to focus on productivity, costs and competitive factors, rather than wasting resources on protecting themselves against uncertainty about future inflation.