Good evening everyone
Monetary policy and financial stability are often viewed as separate issues for central banks. Yet history shows that, especially during periods of profound economic change, they are closely intertwined.
How should central banks navigate the interaction of monetary policy and financial stability? The way central bankers think about this question has evolved over time. Many policymakers learned from the Global Financial Crisis (GFC) in 2008 that financial stability risks should be mitigated more pro-actively, before a crisis hits.
Tonight, I would like to revisit this lesson and discuss how it applies to Switzerland in practice. I am delighted to be here in Basel and to have the opportunity to engage with you. And I am even happier that we will be continuing to discuss the topic with Sarah Lein and Nikola Tarashev in the panel later.
I will start by arguing that monetary policy and financial stability can go hand in hand. Indeed, they even reinforce each other. For that, policymakers need to have the right tools. What are the right tools and how can these tools evolve to continue strengthening the resilience of the Swiss financial system in the future?
To address these questions, I will first provide some background on how exactly monetary policy and financial stability interact. Then, using some concrete examples from the recent past, I will illustrate how the SNB deals with the interaction in practice.