A more immediate impact of monetary policy on a wide range of asset prices may have favourable implications, since it provides monetary authorities with a powerful instrument for affecting the economy. Market expectations on future policy intentions move long-term rates and affect financing conditions, even before official interest rates are changed. The modification of asset prices affects consumption and investment decisions.
If policy communication is effective, these changes may partly “do the job” for central banks. At the same time, unless we are suitably careful the consequences may be disruptive.