The third reason why monetary policy may evolve because of the crisis is the growing consensus that central banks need to guard against the development of financial imbalances. However, no consensus has emerged about how to best do so. One view is that central banks should “lean against the wind” when asset prices and credit are increasing rapidly.
Whether that is desirable depends on several factors, in particular on what the costs might be in terms of lower economic activity. The competing view is that solely macro prudential instruments should be relied on in preventing the formation of bubbles. If so, how would they interact with monetary policy and is there a need for explicit coordination of monetary and macro prudential policy?