Final answer:
Adopting a strategy of keeping people guessing may hinder the central bank's ability to stimulate the economy effectively and achieve its objectives. Consistency, transparency, and clear communication are crucial for a central bank to instill confidence in market participants and implement successful monetary policies.
Step-by-step explanation:
While there is no final consensus among economists on whether a central bank should focus solely on inflation or have greater discretion, there are concerns about the consequences of constant political pressure on the central bank. If a central banker adopts a strategy of keeping people guessing and frequently announcing one change but then doing something else, it can lead to uncertainty and confusion in the economy. This could result in reduced effectiveness of monetary policy, as people may lose trust in the central bank's actions and become hesitant to make decisions based on its announcements.
Additionally, implementing conflicting policies can lead to unintended consequences and mixed outcomes. For example, if the central banker announces a policy to stimulate the economy but then takes actions that result in tightening monetary conditions, it can disrupt economic stability and undermine the central bank's objectives. Over time, such inconsistency may weaken the central bank's credibility and ability to achieve its goals.
In summary, while the strategy of keeping people guessing may seem unconventional, it poses risks to the central bank's ability to stimulate the economy effectively and achieve its objectives. Consistency, transparency, and clear communication are crucial for a central bank to instill confidence in market participants and implement successful monetary policies.