If workers adjust their expectations in accordance with actual inflation and demand higher nominal wages, it leaves relatively little incentive for firms to increase the output. BIS Review 163/2008  1  Therefore the focus has shifted away from this trade-off and new consensus has emerged in the literature that price stability is key to long run growth prospects.
Both theory and evidence suggest that monetary stimulus can only affect real economic activity in the short-run. In the long run, however, there is no conflict between low inflation and full utilization of economic resources. Ensuring price stability, in turn, requires effective management and anchoring of inflation expectations.