4  BIS central bankers’ speeches  3.1  Monetary policy and macro prudential policy  It is sometimes argued that monetary and macro prudential policy are close cousins, and that changes in one can substitute for the other. Of course, they both affect the supply of credit in the economy and therefore firms’ and households’ spending decisions.
In turn, that means that they both affect economic activity and inflation. There is therefore a need for some coordination between them to ensure that they do not operate at cross purposes. This is one reason why it is essential that the central bank is crucially involved in the formulation of macro prudential policy.