Unconventional monetary policy is more intrusive than conventional monetary policy. It creates deeper market distortions that can generate misallocation and financial stability risks. As long as the standard economic relation between domestic slack and inflation, the so-called Phillips curve, fails to assert itself, adding ever more stimulus makes our policy increasingly procyclical, reinforcing these risks.
Taken together I think these factors go a long way towards explaining the rather drawn-out nature of the global recovery to date – even though, as I said, conditions now are much better than they were a few years ago. Policymakers around the world have been responding to this situation on a number of fronts.