Their paper discovers that in any bout of inflation, a central bank that has a greater history of fighting inflation also has the ability to deviate further from strict Taylor Rule guidelines, without achieving worse inflation outcomes.

Jackson Hole speaker Emi Nakamura talks credibility, tariffs and independence

"It's easy to forget how remarkable it was that the Fed was able to look through 7% to 8% inflation while maintaining almost completely anchored long-term inflation expectations. This requires (an) extremely strong reputation," Nakamura said, something that hinges "on institutions like central bank independence and a strong track record, and those are things that take a long time to build up and perhaps not very long to destroy."