Central banks would need to respond in perfect symmetry to overshooting and to undershooting stock prices. Financial markets would become severely distorted if market participants were to come to the conclusion that the central bank would let them enjoy returns when the markets are up but bail them out once the market goes downhill.
Instead, we should stick to our tried and tested approach of stabilising the general price level in the product and services markets. Nonetheless, monetary policy contributes to a sound development of asset prices. The Eurosystem’s monetary policy strategy emphasises money supply in the first pillar of its strategy.