This oversight is unfortunately necessary because the financial sector tends to be overoptimistic in good times (booms/bubbles) and overpessimistic in bad ones (busts/recessions/credit crunches/ depressions).
"Future money" and "current money" are subject to the same laws of supply and demand as any other good, where the price of current money (as measured in future money) is expressed in the interest rate. Central banks targeting an interest rate is exactly the same as putting a price ceiling on current money: it will cause overconsumption of current money (excessive borrowing/consumption -- look at our negative savings rate in recent years!), with the government there to make up for the shortages in supply that would normally result from a price ceiling. I expect that, as an economist, you understand the price ceiling phenomenon pretty well... and I would hope that you don't usually advocate that governments set price ceilings at below-market prices!
This overconsumption manifests itself as "overoptimism," but it is just a rational response to the prevailing interest rate. If that interest rate were the true market rate, it would be the correct response... just "optimism." Unfortunately, the rate is often pushed lower by the central bank, which means the optimism turns out to be unjustified... leading (most recently) to the internet bubble and the housing bubble.
Have you ever priced a project or investment for a company, to determine whether to undertake it or not? I have, and a crucial part of the decision is calculating the present value of the future cash flows in different scenarios. The lower the interest rate, the better a project will look when it involves a cost now for a payoff in the future. There will be fewer scenarios where it loses money. Seen from a different standpoint, the borrowed money to fund the project's upfront costs is cheaper to acquire. That's how low interest rates are linked to "optimism." When the interest rate gets lower, people's rational response is to undertake more of these projects. (These "projects" are not just by large businesses... they can also be individual investments such as buying/building a house. People definitely look at the mortgage rates when deciding whether they can buy a house or not, although they won't generally make the same type of formal calculations that a large business would.)
When the interest rate is artificially low due to a central bank price ceiling, people's rational response to that market signal is to undertake projects that would have been too risky and/or costly otherwise. Those projects eventually reveal themselves to be bad investments, often when the interest rates come back up. The project owners find themselves unable or unwilling to continue funding what is now a money-loser, and they have to do all the things that are typical of a bust: default on their loans because the project didn't pay off, lay off the people who were working on the project, and so on. Nothing about this scenario necessarily involved irrational behavior on the part of the investors... they simply used the market signals that were available. The distortion of those signals is what causes some of the effects of the boom and bust cycles.
I'm not claiming that all business cycles are caused by central banks or fiat currency, but I am definitely suggesting that they make things worse with their active "management" of interest rates, and that you can predict and explain the effects using supply and demand.
Of course there will be inflation when demand picks up, this is why there always will be inflation in a growing economy.
In general, a growing economy with a fixed money supply should see deflation, as the same nominal amount of money will be chasing a greater number of goods... at least, that's how supply and demand would work out. Can I ask why you think otherwise?
The reason why we usually see inflation over the long run is because the money supply is NOT fixed. (That's the problem with a fiat currency.) The money supply is more than keeping up with the growth of real wealth.
For example, if the real economy is growing at 3% and the money supply at 5%, the reported CPI would show 2% inflation (over the long run, ignoring any temporary shocks to supply or demand of money or goods as a whole). I would actually consider that to be 5% inflation: However many dollars I was holding at that time, they lost 5% of their value due to the increase in money supply, since that increase was a completely independent event from the real economy growth.
(As an aside, this money supply increase could happen either if the central bank increased the quantity of the fiat currency arbitrarily, or if we had a gold standard and someone discovered a cheap way to synthesize gold or located a huge untapped deposit. However, at least in the case of a hard currency it would not be subject to complete and arbitrary control! The better solution than either of those is a broader commodity-basket-backed currency, so that the money supply is unlikely to go up or down significantly.)