As long as interest rate policies may affect the buildup of financial vulnerabilities, an inflation-targeting central bank may need to worry about such forces and act in a manner that complements macroprudential policies. Even if macroprudential policy is best suited to ensure the resilience of the financial system, that does not mean it is capable of eliminating all the risks associated with financial vulnerability.
Other complementary policies could also help manage the trade-offs faced by inflationtargeting central banks in the presence of financial vulnerabilities. For example, fiscal automatic stabilizers that ramp up during severe financial stress periods also improve the trade-offs faced by central banks and help monetary policy to achieve its target and stabilize the economy (MacKay and Reis 2016; Meh and Poloz 2018).