But is there an ex ante role to play for the central bank alongside regulatory policies? Can it discourage risk-taking behaviour by the financial sector before excessive balance sheet risk is created? The developments in the run-up to the global financial crisis have shown that price stability, while being a necessary precondition, is not sufficient for financial stability.
Low and stable inflation rates before the crisis coincided with a build-up of financial imbalances, leading to an increase in systemic risk and, ultimately, serious risks to price stability later on.