A senior policymaker recently highlighted a critical point: the Fed's hard-won credibility on inflation control stands as one of their major policy achievements over recent years. Yet here's the catch—this credibility isn't a prize you lock away and forget about.

The real challenge? Maintaining it demands constant vigilance. One slip, one perception of wavering commitment, and years of reputation-building can unravel faster than expected. It's not just about hitting the inflation targets; it's about consistently signaling that you mean business.

For markets and investors, this matters. When central banks lose credibility on inflation, you get expectations that become unanchored, which feeds into wage-price spirals and makes future rate hikes even more painful. The Fed learned this lesson the hard way in the 1970s.

So the warning here is straightforward: policymakers shouldn't get complacent. That credibility is fragile. Every policy decision, every communication, every inflation print gets scrutinized. One moment of hesitation or inconsistency, and the entire inflation-fighting framework gets questioned all over again.