Over the next five years, it rapidly lost its pivotal role, because the key relationship in this view-of-the-world broke down -- the relationship between money and nominal income turned out to be unstable.2 With the breakdown of the anchor of a stable money demand function, practitioners were forced to look elsewhere. In our own case, it has taken us, eventually, to an inflation target.
But others have put forward the view that monetary policy should only care about price stability, without any direct concern with output. The origins of this can be found in Friedman’s monetarism (he was, of course, concerned above all with price stability). It seems only a minor elision to slip from monetarism to a single objective for monetary policy.