Let me emphasize that under this policy proposal, core inflation reaching 3 percent is only a risk – and not a certainty. Indeed, simulations of standard models suggest that core inflation is likely to remain below 3 percent even under a policy of extended monetary accommodation. But the economy may behave differently than expected. Still, 3 percent inflation is a risk that we should be willing to accept. If, contrary to most evidence, the natural rate of unemployment is higher than 7 percent, then under this policy inflation will rise more quickly and without any improvements to the real side of the economy. In such an adverse situation, the inflation safeguard triggers an exit from what would be evidently excessive policy accommodation. And it would do so before inflation expectations would be in much danger of becoming unhinged. We would not have the desired reductions in unemployment, but then again, there wouldn’t be anything that monetary policy could do about it. We would suffer some policy loss in that a 3 percent inflation rate is above our 2 percent target. But we certainly have experienced inflation rates near 3 percent in the recent past and have weathered them well. And 3 percent won’t unhinge long-run inflation expectations. We are not talking about anything close to the debilitating higher inflation rates we saw in the 1970s or 1980s. Most importantly, we would also know that we had made our best effort.
Friedman, Milton, and Anna Jacobson Schwartz, 1971, A Monetary History of the United States, 1867–1960, Princeton, NJ: Princeton University Press. BIS central bankers’ speeches  7