Dealing with supply side sources of inflation posed challenges for the conduct of Reserve Bank’s monetary policy, particularly in the face of signs of cyclical slowdown on the one hand and the risk of spiralling headline inflation on the other.
The second major argument against a large involvement of central banks in supervision is the alleged conflict of interest between monetary policy and prudential supervision. Many authors have argued that the institution in charge of monetary policy cannot be entrusted with supervision, because the monetary policy stance would be "contaminated" by supervisory issues, for instance the need to safeguard the liquidity of individual banks.