The separation principle that guides the conduct of monetary policy and the management of liquidity during a financial market correction implies that the policy interest rate is not employed to alleviate stresses in the financial system if upside risks to price stability prevail.
Only if the preservation of price stability is secured over the medium term, and will not be jeopardised by a change in the monetary policy stance, can the policy interest rate be employed to mitigate the impact of financial market stresses in the economy, including their potential effects on medium-term price developments.