Norges Bank’s Olsen backs ‘leaning against the wind’
Taking account of financial stability could improve inflation outcomes
Central banks would be wise to use their main policy rate to lean against the build-up of financial imbalances, Norges Bank governor Øystein Olsen said on April 27.
Norges Bank has at times kept the interest rate "somewhat higher" than the level implied by medium-term inflation and the output gap, Olsen said, to counter the effects of financial imbalances – a policy known as "leaning against the wind".
Olsen warned current understanding of macro-prudential tools is "still limited", while "we do
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