For instance, for some time several economists – including those working at the BIS – have been urging an increase in the interest rate to restore risk premia to more normal levels. Most central bankers say they would prefer to use macroprudential tools rather than the interest rate for this purpose.
While such tools would have the advantage of being directly targeted at the problem that is to be solved, it is not clear that there are sufficiently strong macroprudential tools to deal with all financial instability problems, and it would make sense not to rule out the possible use of the interest rate for this purpose, particularly when other tools appear to be lacking.