Moreover, despite the strategy review recognising that “financial stability is a precondition for price stability”, the revised forward guidance seemed to have disregarded potential side effects in practice. For one, if r* is estimated to be low, there is no problem in keeping interest rates low. In addition, models often do not allow for the possibility of long-term financial stability risks.
All the same, at the time of its establishment the National Bank was not the mere puppet of the big private banks. Thus, the Governor, the linchpin of the system, was appointed by the King and the Government also nominated a Commissioner, making the institution different from its counterparts in neighbouring countries.