So far from Ricardo, so near Wicksell

The two objectives of monetary and financial stability are not generally in conflict. Normally, the two go together. It is true, however, that stabilizing the consumer price index (or its rate of growth) does not guarantee stability of the financial system. In fact, under certain conditions, concentrating on year-to-year monetary stability can lead you to follow policies that are inimical to financial stability over the longer run. The financial system has evolved very rapidly in the last twenty years. It remains to be asked, therefore, if this development has “made the (financial) world a safer place”, or, if it has not, if the central banks have the adequate powers to cope with the consequences. In this context, the trouble with inflation targeting in present circumstances is that a constant inflation rate gives you absolutely no information about whether your monetary policy is right. In light of the current financial imbalances and their macroeconomics consequences, it may be that the more appropriate conclusion to draw is that macroeconomic developments are more likely to trigger trouble in the financial markets than vice versa.