While some would argue that prudential and not monetary policies should address financial stability risks, I tend to agree with former Bank of England deputy Governor Charles Bean that there are “important qualifications to this somewhat Panglossian view of the ability to maintain both price stability and financial stability by assigning monetary policy to the former and macroprudential policy to the latter.”6 After all, only monetary policy sets “the universal price of leverage”.7 Conversely, materialization of financial stability risks can also become detrimental to price stability.
Therefore, amid the evolving payments market, one of the key motivations for the retail CBDC is to ensure people’s continued access to the central bank money. --Beyond payments, CBDCs could have important and, perhaps, desirable implications in other areas as well.