While they have different primary objectives of price stability and financial system stability respectively, there can be important spillover effects between the two policies. In the Policy Targets Agreementfinancial stability is a secondary objective; in the macro-prudentialMemorandum of Understanding, macro-prudential initiatives need to have regard to their potential impact on monetary policy.
Shifting Stars and the “New Economy” of the Late 1990s The second half of the 1990s confronted policymakers with a situation that was in some ways the flipside of that in the Great Inflation. In mid-1996, the unemployment rate was below the natural rate as perceived in real time, and many FOMC participants and others were forecasting growth above the economy’s potential.