They have to bear in mind the long-term risk that their actions might impose on financial institutions, and on the financial system as a whole. Economic and financial incentives have to be aligned with this simple principle. As yet, I have, however, not seen any significant change in the behaviour of market participants.
84/3. Empirical confirmation of that conjecture is provided in Jagjit Chadha and Joe Ganley (1998), “Monetary policy, inflation persistence and the term structure of interest rates: Estimates for the United Kingdom, Germany and the United States” in Ignazio Angeloni and Riccardo Rovelli (eds. ), “Monetary policy and the term structure of interest rates”, London: McMillan.