The given statement is false. When the central bank reacts because inflation is above the target, the central bank’s approach will be to adopt a tight monetary policy, that is, to reduce aggregate social demand by cutting the money supply. This means that the central bank has to keep inflation below the target by raising interest rates, then investment will fall, the cost of output for producers will increase, and firms will need to contract production by reducing their staff, which will cause the economy to enter a low level of output. Thus if the central bank responds relatively positively to above-target inflation, temporary supply shocks can have a relatively high impact on output.