Uncertain Accommodative Policies as Tools for Financial Stability

Uncertain Accommodative Policies as Tools for Financial Stability

Uncertainty has been a prominent feature and characteristic recently. Not just in relation to Brexit, ongoing trade wars, and namely global financial markets and volatilities triggered owing to unpredictabilities, but also in matters relating to monetary and unconventional policies. Price stability being a major component of the dual mandates of many leading economies and arguably and probably more important than its other component, namely, maximum employment. In recent times, it is becoming more evident that the central role assumed by inflation as a monetary policy instrument is gradually being eroded by the need for accomodative non conventional monetary policy instruments in the form of government asset purchasing programs or quantitative easing. This was reflected by the European Central Bank's instigated program of purchases of government bonds and more particularly its expanded asset purchase program in January 2015. The need for accommodative monetary policies and namely, unconventional monetary policies is cited as being crucial to fulfilling the ECB's stability mandate. In the ECB's President's words "without new unconventional measures, the ECB would not be able to fulfill its stability mandate."