Said differently, it may be worthwhile to temporarily tolerate small deviations from the 2 percent inflation target if this yields large gains with respect to financial stability. 11.
This can be done, for example, by flexibly adjusting the medium-term horizon over which inflation is brought back to target, by prioritising tools with lower side effects, and by designing monetary policy tools in a way that mitigates financial stability risks. See Schnabel, I. (2021), “Monetary policy and financial stability”, speech at the fifth annual conference of the European Systemic Risk Board, 8 December.