Challenges for monetary policy The recent and current episodes of financial turmoil in the past twenty years show that central banks face various challenges in the context of monetary policy as broadly defined by Friedman. 2  BIS Review 67/2008  The first challenge is how we should define and understand price stability which is an objective of monetary policy.
Be it in Japan or in the U.S., many of recent bubbles occurred, quite paradoxically, following continued low interest rate period after price stability was achieved or deflation scare heightened.