Besides regulatory arbitrage, we must also pay attention to the cumulative effects of, and the interplay between, individual regulatory initiatives. Where there is a lack of consistency there is a danger that different measures may create conflicting incentives or may even cause countervailing effects. This then may diminish, or even completely prevent, the desired effects of new rules.
Because monetary policy actions take time to have their full impact on the economy, we must aim these actions at where we see the economy sitting 18 to 24 months into the future.