To avoid threatening the monetary policy objective, these deviations could be recovered over time in order to keep the economy on a predetermined path for the price level. The prospect that the target rate could be deployed in this manner would help maintain a balance between macro and idiosyncratic risk.
This is a live issue in our country in the context of the immense needs of infrastructure financing. Thus, as in the case of price stability, central banks face the challenge of managing the trade-off between financial stability and growth. It needs to be recognized that after a crisis, with the benefit of hindsight, all conservative policies appear justified.