If the institutional setting for macroprudential policy is not configured properly, its coordination with monetary, fiscal, and other policies may well become problematic. As macroprudential policies are thrust into the spotlight, it is possible, misguidedly, to take the view that it is feasible to deal with inflation by means of macroprudential tools.
Accordingly, monetary policy is increasingly likely to be adversely affected by the overzealous use of macroprudential tools. Hence, it is critical that there should be a clear understanding that macroprudential policy does “not substitute” for monetary policy but rather “complements” it. IV.