In “Is monetary policy overburdened?” Athanasios Orphanides, the perfect insider, having been Board Staff Member and Central Bank President (Cyprus), writes:
Placing price stability first helped central banks to depoliticize the monetary policy process and gain credibility as independent institutions, key elements that allowed central banks to contribute towards greater overall stability and effective crisis management. The success central banks had achieved in anchoring inflation expectations is what enhanced their flexibility to respond promptly and aggressively in crisis situations. In 2008 and 2009, such aggressive action by central banks averted a collapse of Great Depression dimensions. This was feasible precisely because there were few questions about the credibility of the central banks in maintaining price stability. The crisis-handling episode highlighted the value of independent central banks focused on price stability.
The correct focus is on overall nominal stability. The single-minded focus on price stability is behind the appalling economic performance of recent years. Japan until very recently should have provided the abject lesson.
Historinhas 