Public remarks by policymakers in the run-up to the crisis show that officials were cognisant of the increased challenges for monetary policy brought about by financial globalisation. The remarks by former Federal Reserve Chairman Greenspan noting that the diverging evolution of short-term versus long-term rates in the US represented a “policy conundrum”16 received ample media attention in this regard.
In a speech in March 2007, current Federal Reserve Chairman Bernanke also acknowledged that the central bank’s analysis of financial and economic conditions was becoming more complex17. Former ECB vice-President Papademos noted similar challenges to the central bank’s monetary analysis in another speech in June 200718.