A Little Late

Maybe a few folks at the BIS now realize that the light at the end of the tunnel is, in fact, a train.

The previous analysis suggests that there is a prima facie case for monetary policy to pay closer attention to the financial cycle than in the past. We may have been underestimating the influence of benign disinflationary forces and overestimating the ability of monetary policy to fine-tune inflation, especially to push it up towards targets in the face of powerful headwinds. If so, we may also have been underestimating the collateral damage that such strategies may generate in terms of financial and macroeconomic stability over longer horizons, especially by amplifying the financial cycle.
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