In the ECB strategy review, we addressed the role of fiscal policy, macroprudential policy, financial stability and monetary and fiscal policy interactions. Macroprudential policy has essentially become the second key pillar of central banking today, alongside monetary policy. When financial stability risks grow, macroprudential and microprudential policies are the first line of defence. Most often, macroprudential policies and monetary policy are complementary.
For instance, macroprudential policies that avoid a build-up of imbalances reduce the likelihood of future financial crises with negative effects on price stability. Monetary policy may also affect financial stability risks. On the one hand, accommodative monetary policy can reduce credit risk by boosting economic activity and inflation dynamics.