How did we respond to our diagnosis? In the face of these risks, we did precisely what any central bank would have done: we acted to restore transmission and bring down the average borrowing costs paid by households and firms to levels more consistent with the intended stance of our policy.
We must not forget the lessons of the past, when a lack of central bank independence led to episodes of runaway inflation and subsequent economic contractions. As for financial stability, the crisis and the severe recession that followed revealed serious flaws at many private and public institutions, including shortcomings in supervision and regulation.