For many years, the “mainstream view” was that monetary policy should not “lean against the wind” and/or should not include asset prices in the monetary policy objective function. This was also mainstream thinking in Austria in the 1870s.
However, there are strong indications that monetary policy does – at least indirectly – play an important role for financial stability by affecting the measurement of risk, risk perception and risk tolerance and has done so in the run-up to the current crisis. Does that mean that financial imbalances should be considered when deciding on the appropriate interest rate level?