The OPEC’s oil price increases in 1973 and 1979 were facilitated by the global liquidity conditions that had been created by loose policies and the attendant collapse of the Bretton Woods system. However, the common inflationary shocks from commodity price hikes did not transmit in a similar manner to all developed economies.
Those few economies with a price stability oriented monetary policy framework succeeded much better in containing the impact from external pressures. The clear focus on price stability as the overriding guiding post of our monetary policy also prevails against the background of the current turmoil in financial markets. The turmoil has its roots in a long period of benign economic and financial conditions.