As such, fiscal deficits could become a threat to inflation if conditions in financial markets worsen and monetary financing of the budget becomes inevitable, because government borrowing requirements cannot be met from the market.
Almost three decades of stable inflation followed the implementation of these institutional arrangements. But the debate about monetary policy, mandates and independent institutions re-opened following the global financial crisis. In part, this resulted from the increased use of ‘less standard’ policy levers, such as the expanded use of central bank balance sheets when interest rates hit the effective lower bound.