But this may be followed by a later bust if the accumulation of household debt becomes a drag on consumer spending. The bust can be quite delayed relative to the initial disturbance that induced a boom period. This boom-bust dynamic makes vulnerabilities distinct from accelerators and gives rise to new challenges and trade-offs for monetary policy.
For example, if a central bank in such an environment were to cut interest rates to stimulate demand and help inflation attain its target, this would generally favour an expansion— and increase inflation as desired. However, if there were financial vulnerabilities at play, this could turn out to be costly later.