As a matter of fact, price stability is a necessary condition for financial stability, in that asset prices and financial volumes are bound to reflect and amplify erratic swings in inflation expectations – if and when a central bank allows these to happen. But price stability is not a sufficient condition for financial stability.
I will elaborate on this insufficiency paradigm and the corollary that the ECB derives from it. I will also argue, inversely, that financial stability is a necessary precondition for monetary policy, in that it creates the conditions for monetary policy to attain its objective.