Exit is very likely to take place in an environment where credit has recovered and risks have receded in the economy, making the financial sector more robust to interest rate shocks. The current situation of subdued bank lending and outlook for growth in the euro area is a case in point.
Yet, monetary policy-makers have to be aware of these challenges and need to guard against the risk of financial dominance by keeping a clear focus on their respective mandate. For the ECB, our “hardwired” focus on price stability provides a clear guidepost that has proved effective in anchoring inflation expectations over time.