Managing the macroeconomy to achieve strong growth and low inflation is a careful balancing act.
Overly restrictive macroeconomic policy – such as too-high central bank interest rates – stifles growth, but policy that is too loose risks ‘overheating’ the economy and triggering high inflation.
However, over the last two decades an interesting phenomenon occurred: countries that ran their economies slightly ‘hotter’ than was previously thought possible registered surprisingly positive effects.