the longer-term inflation outlook, become uncertain, the central bank should act much more firmly to keep price and wage-setting behaviour disciplined. Why is price stability important now? Some think that – regardless of the answer to the question of whether the high inflation will “fall or stick” – the central bank must abandon its rigid stance and give priority to growth.
This is a peculiar idea in a country where economic policy in the past two decades has always seen the solution in inflating away macroeconomic problems, without any tangible improvement in growth, I might add. Indeed, we had to learn the hard way that even though leniency on inflation may appear attractive in the short term, it has never produced any welfare gain.