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How monetary policy shapes the financial cycle
Deutsche Bundesbank
2026.07.07
The study suggests that monetary policy can make an important contribution to stabilising financial cycles. Central banks can significantly suppress fluctuations in financial markets, especially when they take account of credit or house prices alongside their primary objectives. However, this benefit comes with potential costs, as such a generally stabilising policy can also be accompanied by a larger deviation, for example of inflation from its target, at times and in specific circumstances.