A key issue facing policymakers is ensuring that this nascent growth becomes sustainable. Dynamic investment that drives stronger productivity growth is crucial for that – and in turn for the eventual normalisation of monetary policy.
This gives us a sufficiently long horizon to take account of financial imbalances in our strategy. Elements of a “leaning-against-the-wind” approach are therefore implicitly included. However, should there be signs of financial imbalances emerging, we need to carefully consider whether the use of standard monetary policy instruments is appropriate as a response. There are two reasons for this.