In my remarks, I will argue that monetary policy faces significant limitations as a tool to promote financial stability: Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach; in addition, efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment.
From the outset, we have emphasised the need to adopt a medium-term orientation in pursuit of this objective, acknowledging the long and variable lags in the transmission of monetary  10  See: A. Beyer and L. Reichlin (eds.) (2008), The role of money: Money and monetary policy in the 21st century, European Central Bank. 11  See: T. Adrian and H.S.