This gradual and limited rise, occurring over nearly two years, has shown due concern for growth while maintaining our attention on a rising inflation rate. Some voices say that this is a mistake: that we should let inflation go and focus on the output gap. This advice is problematic on several levels.
As economic literature has repeatedly demonstrated and as our experience has once again demonstrated, the output gap is an unreliable measure. 10 It is a poor guide for policy at the best of times. It is an even worse reason to depart from the guidelines entirely.