Due to the asymmetries (very low probability of very large loss) involved, actual inflation is then likely to exceed expected inflation - and optimally so - for quite some time. The above argumentation can be used to illustrate why the ECB has always stressed that its stability-oriented monetary policy strategy is more than simple inflation forecast targeting, and it is also more robust.
But before discussing regulatory implications, let me shed some light on the mechanisms that are at work. In 2009, Paul Krugman coined the term “boring banking” to describe banks focusing on their core business – taking household deposits and being conservative in giving out corporate loans. Banks fulfilled their role of financing entrepreneurship and firm entry, leading to positive firm dynamics and innovation.