Credible Discretion

Brad DeLong writes:

I think, the most interesting thing about the late-Greenspan Fed. He has so much credibility as an inflation hawk that he simply doesn't have to worry about what monetary policy moves over a one or two-year span do to alter people's perceptions of the Fed's tolerance for inflation. As a result, he can be much more aggressive in trying to keep unemployment near its natural rate (whatever that is) than a central banker who would wish to and is known to wish that he could focus on stabilizing employment rather than controlling inflation. Such a central banker has to be constantly reassuring everyone that he is committed to controlling inflation, and so has very little room to respond to shocks--like shocks to oil prices--that might affect both.

Quite right. In short, it's not rules versus discretion it's rules and discretion.