Moreover, U.S. financial conditions remain supportive of growth in economic activity and employment. As always, considerable uncertainty surrounds this baseline economic outlook. At present, one prominent risk is that adverse developments abroad, such as heightened geopolitical tensions or an intensification of financial stresses in emerging market economies, could BIS central bankers’ speeches  1  undermine confidence in the global economic recovery.
Christiano, Motto and Rostagno (2006) show that taking into account monetary indicators in the conduct of monetary policy can also alleviate the macroeconomic volatility arising from overly optimistic expectations. In an earlier paper, Christiano, Motto and Rostagno (2003) also showed that a monetary policy rule that assigned more weight to monetary developments would have substantially mitigated the severity of the Great Depression.