Crucial challenges in this regard include the risk that monetary policy is overburdened by fiscally dominant regimes caused by government’s irresponsible fiscal behaviour and unsustainable public finances. There is also the risk that monetary policy is dominated by financial stability concerns, implying that price stability would be subjugated by financial stability.
Monetary policy frameworks have to be made robust against the challenges ahead and I believe a number of principles for robust monetary policy frameworks should be strongly reaffirmed as a result. First, we should recognise the centrality of price stability for monetary policy. This is the best contribution that monetary authorities can make to overall economic welfare.