Until the Great Financial Crisis, both the practice and the theory of modern central banking revolved around the inflationary tendencies inherent in the conflict between the short- and long-run effects of monetary expansion and in the temptations of monetary financing of government spending.
3 Taking into account the fact that many leading central banks have recently had to deal with below-target inflation, one would have to amend the previous sentence to say that the practice and the theory of modern central banking revolve around the benefits of keeping monetary policy independent of short-term political considerations – with respect to both the stabilization of the price level and the temptations of monetary financing of the budget.