Free lunch and monetary policy reaction function

Seth Klarman of Baupost has written a negative letter of the Fed 's free lunch policy that will have to come due. 

We have heard this free lunch or cost issue before, but it is never easy to know when the day of reckoning will come. However we do have a tool to give us a clue on the timing and the type of cost. The Taylor Rule was developed to provide information on monetary policy reaction functions. The simple reaction function tell us how much weight is placed on controlling inflation versus the output gap. 

Clearly, if there is more emphasis on inflation targeting there will be less inflation risk. Similarly, if there is more weight placed on the output gap there is more room for the inflation rate to increase. To some degree, there is no free lunch between these two. If there is more emphasis on inflation targeting, the cost will be borne by the output gap, and if there is more emphasis on the output gap, there will be a greater cost from higher inflation. Tell us the change in the reaction function and we can tell you something on where the cost of the free lunch will actually be charged.