Ultimately, however, the answer to the question how actively monetary policy should be used to “lean against the wind” will depend on the answer to two other questions: i) How effective will the new macro-prudential policy framework be in reining in the financial cycle and maintaining financial stability? ; and ii) What is the effect of monetary policy on risk taking and financial stability?
Taking the appropriate medium- to longerterm perspective, the continued expansion of money and credit through the course of 2005 gave an intensifying indication of increasing risks to price stability, fully in line with the results of our economic analysis, and vindicating our orientation to progressively increase interest rates by 150 basis points from December 2005 onwards. I thank you for your attention.