Notably absent was any reexamination of monetary policy. Since the Washington consensus on monetary policy has never been articulated as John Williamson did for the overall Washington consensus some years ago, the first step in reexamination is articulation. Such a policy can also offset some unfavorable real shocks by reducing the suddenness with which nominal prices need to change.
Low inflation helps to make long-run economic growth less volatile.
Central bank independence is desirable in developing countries, even though research so far shows no clear link with inflation, as seems to exist for industrial countries. The central bank law should contain a clear commitment to maintaining low inflation as the primary goal of the central bank. An important secondary goal is to provide a safety net for the financial system by acting as a lender of last resort. These goals may conflict at times. For smaller countries, targeting the exchange rate may be more technically feasible than targeting inflation.