Imagine a central bank that has successfully maintained an average inflation rate of 2% for the past 15 years, building a strong public reputation for achieving its price stability goal. Suddenly, a severe global supply chain disruption causes a temporary surge in the prices of imported goods, pushing the country's overall inflation rate to 5%. The central bank's leadership must decide on a course of action.

Evaluate the following two potential policy responses. In your evaluation, argue which response is more appropriate for this specific central bank and justify your reasoning based on the bank's established reputation.

• Response A: Immediately and aggressively raise interest rates to quickly bring inflation back down to the 2% target, even at the risk of causing a significant economic slowdown.
• Response B: Publicly communicate that the price surge is temporary and expected to reverse. Make only a modest adjustment to interest rates, or none at all, signaling a plan to wait for the temporary effects to fade before taking stronger action if necessary.