Sweden’s central bank is the latest to ask whether financial stability should be added to its list of goals. The Riksbank has proposed a formal review, to include “whether it should be explicitly stated … that the Riksbank has a responsibility for financial stability”.
A similar question was raised at a central banker conference on Friday by India’s central bank governor Dr Duvvuri Subbarao. The significance of the question is great: price stability was previously thought necessary – and perhaps even sufficient – for financial stability. Now there is a growing belief that there might be a trade-off between the two.