When the monetary authorities judge that important asset prices or rates of credit expansion are deviating from sustainable long-run trends, should they adjust their policy setting to damp those price and credit movements – beyond whatever actions might be called for to preserve macroeconomic stability over the usual two-three-year planning horizon for monetary policy?
This has taken place not only in the euro area but also in much of the world, including the US, which has undertaken a much larger fiscal stimulus than we actually have. The excess demand has pushed up the prices of energy products, including oil and natural gas.