If people consider that the Bank is not serious about achieving the price stability target of 2 percent at the earliest possible time, QQE, which has been exerting intended effects so far, would not function properly anymore. Actually, the large reaction by markets after the additional easing suggests that the Bank’s determination may have been questioned earlier.
In policy design, monetary authorities should explicitly try to avoid ex ante the emergence of imbalances that could lead to financial instability. The aim is to “reduce the frequency and severity of bouts of financial instability in the future”, as Ben Bernanke argues. Recent literature has shown results that are ambiguous or even contrary to those yielded by the usual “technology”.