If anything has survived the global financial crisis, it is inflation targeting. This is odd. After all, pre-crisis, many economists and policy makers in developed markets enthusiastically embraced the “Great Moderation” – the idea that wise monetary policies had not only helped bring inflation to heel but also, as a result, delivered more stable economic activity. “No more boom and bust” was not the boast of politicians alone: it became a core belief?of the economics establishment.

Yet the boast was clearly wrong. A narrow focus on preventing rapid price rises ultimately proved highly damaging. Policy makers ignored other signs of incipient instability; most obviously, rapid credit growth and, in the US at least, surging housing activity. Having done so, they gave the go-ahead to excessive risk-taking: with inflation under control, there was no reason for investors to fear monetary shocks.

History shows, however, that economic and financial crises are more often associated with periods of low, not high, inflation. The former may be desirable in many respects but it seems the obsession with precision-engineered targets simply reflected the fears of a generation of policy makers scarred by monetary mistakes of the inflationary 1970s.