•  Second, the ECB’s analysis of monetary and credit developments 7 aimed at identifying longer-term inflation risks can also provide signals of growing financial imbalances, which could in principle be used to implement a policy of “leaning against the wind”. This is because there is a close link between monetary and credit developments and evolving imbalances in asset and credit markets.
8 By exploiting this link, our monetary analysis (consisting of a comprehensive assessment of liquidity and credit conditions) may provide early information on developing asset price imbalances and, therefore, allow for a timely response to the implied risks to price and financial stability. Thus, the ECB’s two-pillar strategy may represent a practical way of mimicking the “leaning against the wind” approach.