Over the past three decades, we have seen a remarkable change in the performance of monetary policy. By the end of the 1970s, inflation had risen to very high levels, with many countries in the Organisation for Economic Co-operation and Development (OECD) experiencing double-digit inflation rates (Figure 3.1). Most OECD countries today have inflation rates at around the 2 per cent level, which is consistent with what most economists see as price stability, and the volatility of inflation has also fallen dramatically (Figure 3.2). One concern might be that the low and stable levels of inflation might have been achieved at the expense of higher volatility in output, but that is not what has occurred. Output volatility has also declined in most OECD countries (Figure 3.3). The improved performance of monetary policy has been associated with advances in the science of monetary policy; that is, a set of principles that have been developed from rigorous theory and empirical work that have come to guide the thinking of monetary policy practitioners.