We still have much to learn about how price stability and financial stability outcomes move together, about the relationship of CPI and asset price inflation, and about the interplay of credit and economic activity. As a small, flexible and full-service central bank, the Reserve Bank is in a good position to be at the forefront of progress in integrated macro-financial policy design.
In terms of effectiveness, he points to research suggesting that monetary responses to asset price movements have a strong signaling impact, materially changing the risk perceptions and behavior of financial intermediaries. In short, he sees conventional monetary instruments as a legitimate instrument in addressing the financial stability objective.