Indeed, the aim to stabilise the inflation rate around a short-term point target and disregard of the risks implied by unsustainable financial and monetary trends has in my view led to too lax a monetary policy stance in many parts of the world from the second half of the 1990s until the beginning of the financial turmoil in August 2007.
This accommodative stance has probably contributed to inflating the stock market and, subsequently, the housing markets. 5 Monetary policy in advanced economies needs to be more effectively geared to maintaining price stability with a medium-term orientation, also taking into account longer-term risks to price stability emanating from destabilising financial and monetary trends. 4 5  2  See Bordo (2007a, 2007b). See e.g.