In this sense, inflation targeting cannot be blamed for failing to prevent the financial crisis.7 Financial stability concerns should be addressed with macroprudential tools, generally of a regulatory nature. Some of these instruments should be given to central banks to be used as complement to monetary policy as has been the case in several countries following the crisis.
This principle is reflected in the ECB’s new microprudential and macroprudential competences, including the power to top up national macroprudential measures. Let me now turn to the second argument against inflation targeting: its apparent inability to engineer a quicker recovery in economic activity and inflation.