However, if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous buildups of financial risks, we must remain open to using monetary policy as a supplementary tool for addressing those risks – proceeding cautiously and always keeping in mind the inherent difficulties of that approach.
Clearly, we still have much to learn about how best to make monetary policy and to meet threats to financial stability in this new era. Maintaining flexibility and an open mind will be essential for successful policymaking as we feel our way forward. References Ahearne, Alan, Joseph Gagnon, Jane Haltmaier, Steven Kamin, and others (2002).