Seven don'ts and one hope: The nexus between prudential and monetary policies

Speech by Mr Claudio Borio, Head of the Monetary and Economic Department of the BIS, at the SUERF-Deutsche Bundesbank-IMFS Conference  on "SSM at 1", Frankfurt, 3-4 February 2016.

BIS speech  | 
03 February 2016
by Claudio Borio

Abstract

In the hope of edging closer to taming the financial cycle, this presentation puts forward seven suggested "don'ts": don't oversimplify the distinction between micro- and macroprudential policy; don't underestimate the role of capital as the basis for lending; don't set overly ambitious goals for macroprudential frameworks during busts; don't regard the length of the financial cycle as a reason to forget monetary policy; don't overlook the impact of the financial cycle on productivity growth; don't think of a financial stability-oriented monetary policy simply as "leaning-against-the wind"; don't presume that even monetary and prudential policies combined can tame the financial cycle.

The views expressed here are my own and not necessarily those of the BIS or its member institutions.