Towards a financial stability-oriented monetary policy framework?

Presentation by Mr Claudio Borio, Head of the Monetary and Economic Department of the BIS, at the "Central banking in times of change" - conference on the occasion of the 200th anniversary of the Central Bank of the Republic of Austria, Vienna, 13-14 September 2016.

BIS speech  | 
14 September 2016

There has been intense debate during the last decade or so over whether monetary policy should take financial stability into account rather than focus exclusively on price stability. Drawing on recent BIS research, this presentation argues that a shift towards a financial stability-oriented monetary policy framework could yield benefits. For this to be the case, the framework would need to allow for a systematic response of monetary policy to the financial cycle in addition to output and inflation. It would be imprudent to follow a policy of selective attention, whereby monetary policy leaned against financial imbalances only when signs of their emergence became evident. Such a framework would call for refinements designed to allow sufficient flexibility in the pursuit of inflation targets.