That way, monetary policy can concentrate on its long-standing goals of price stability and maximum employment. Supervision and regulation must serve as the first and main line of defense in addressing systemic risk. We have at our disposal a tool kit of regulatory instruments that are well adapted for this purpose. Monetary policy cannot be a primary instrument for systemic risk management.
First, it has its own macroeconomic goals on which it must maintain a sharp focus. Second, it is too blunt an instrument for dealing with systemic risk. All the same, I cannot unequivocally rule out the possibility that situations could emerge in which monetary policy should play some role in reining in risk-taking behavior. I will return to this point later.