Graph 4  Would we automatically select the first of these two possibilities purely on the basis that inflation is at target in two years' time? There would be a fair proportion of people who might select the second alternative, given the choice. Of course, life is not quite as simple as the hypothetical choice I have concocted here.
We don't know enough about the behaviour of asset prices, much less their linkages to the economy through the financial sector, to make such forecasts with any confidence. Nor do we know much about how the dynamics might respond to monetary policy. So we cannot easily identify the optimal response to the situation.