The crisis has brought this dilemma into sharp focus. On the one hand, central banks want to use the instrumentality of forward guidance to manage expectations, and even outcomes; on the other hand, they cannot be precise enough because of external uncertainty. How to communicate monetary policy so that the benefit-cost balance is positive is yet another dilemma for central banks.
BIS central bankers’ speeches  5  Should monetary policy respond to asset prices? 31. Among the many questions thrown up by the crisis is one about the role of central banks in dealing with asset price bubbles. The broadly accepted theology before the crisis – although not the only view – was the Greenspan orthodoxy which can be summarized as follows.