Instead, our aim is to control the way they propagate risk, including in particular the way they allocate losses in case of a participant’s default. Second, while the microprudential and macroprudential approaches have different perspectives, they may in practice rely on some of the same tools to reach their objectives.
The roots of this consensus are (1) the greater appreciation of the benefits of price stability for durable economic growth and social welfare; (2) the recognition that monetary policy can effectively determine price developments over the medium and longer run, but cannot permanently and systematically influence economic activity; (3) growing evidence that independent central banks can pursue price stability effectively while minimising output volatility.