Quantifying financial stability risks for monetary policy
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Saturday, February 3, 2024
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They could rapidly tighten monetary policy at the risk of fuelling financial distress after years of ultra-low interest rates and balance sheet expansion.
Key Points:
- They could rapidly tighten monetary policy at the risk of fuelling financial distress after years of ultra-low interest rates and balance sheet expansion.
- Quantifying financial stability trade-offs therefore requires a way to gauge the three-way interaction between monetary policy, financial stability conditions and tail risks to the economy.