A sub-par global economic recovery and low global inflationary pressure have enabled a very expansionary monetary policy stance in recent years. However, there are concerns that this policy is precipitating financial market imbalances that may lead to the next downturn. The great financial crisis of 2008/09 has clearly shown that financial markets matter for economic and price stability.
What is less clear, however, is whether, and how, central banks should take the financial cycle into account when setting monetary policy. In fact, a consensus seems more remote than ever. The debate has grown more pronounced, with two prominent opponents bringing their arguments to the point recently.
