Increasing awareness that: (1) price stability, while being a necessary precondition, is not sufficient for financial stability, and that (2) in regimes of low and stable inflation with firmly anchored inflation expectations, ample liquidity conditions and unsustainable economic expansions seem to manifest themselves first in the build-up of financial imbalances rather than in immediate inflationary pressures has re-opened the debate about the opportunity of pursing a “leaning against the wind” approach to monetary policy.
Leaning against the wind can be defined as a strategy whereby a central bank would decide, for instance, to set a somewhat tighter monetary policy stance than would be the case under a similar macroeconomic outlook and more normal financial market conditions in the absence of concerns about the emergence of an asset price bubble.