Should monetary policy be used to target financial stability?
1 year, 9 months ago

Should monetary policy be used to target financial stability?

Live Mint  

The recent turmoil in US financial markets, triggered by the collapse of Silicon Valley Bank, has raised questions about the impact of the Fed’s monetary policy on the stability of the banking system. Expecting monetary policy to also keep an eye on financial stability will distract attention from the central bank’s legally mandated objective and may lead to destabilising outcomes for the economy in general. Given the challenges of definition and measurement, it is more difficult for monetary policy to target financial stability than price stability, which can be clearly defined and measured. In India, for example, the inflation targeting framework clearly lays out the goal of the RBI’s monetary policy as achieving a 4% CPI target.

India Policy Financial Inflation Monetary Policy Financial Stability Liquidity Fed Rbi System Stability Target Price Monetary Price Stability Instability Financial Instability  policy  system  stability  financial  target  price  liquidity  used  monetary  instability  inflation

History of this topic

On monetary policy and financial markets
5 months ago

On monetary policy and financial markets

The Hindu  

Global financial markets may be exhibiting recovery following the dramatic falls in value, but the global economy is still in uncharted waters. The Bank of Japan’s decision to raise interest rates after years of keeping them low has also rattled financial markets, setting off a reversal of equity flows and a collapse in Asian markets. The carry trade On the …

‘Financial stability is a key theme for monetary policy’
5 years, 6 months ago

‘Financial stability is a key theme for monetary policy’

The Hindu  

With the liquidity crisis of non-banking finance companies threatening to spillover to other sectors, Reserve Bank of India governor Shaktikanta Das has highlighted the importance of the central bank’s role to maintain financial stability. Speaking at the Lal Bahadur Shastri National Academy of Administration, Mussoorie, Mr. Das said while there is no explicit mandate of the monetary policy to maintain …

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