Interaction between price stability and financial stability- compilation of papers

Following recent episodes of stress in the banking sector in the US and Switzerland, the ECB’s role in safeguarding financial stability is under scrutiny. The ECB has claimed that no trade-off exists between its primary mandate on maintaining price stability and safeguarding financial stability. Furthermore, the 2021 monetary policy strategy review confirmed that financial stability is a pre-condition for financial stability, and vice-versa. Yet, further interest rate hikes may still give lead to headwinds for the financial sector. Four papers were prepared by the ECON Committee’s Monetary Expert Panel, analysing the implications of financial stability on the ECB’s conduct of its monetary policy. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 5 June 2023.