While the business cycle relates to real GDP fluctuations, the financial cycle considers the evolution of variables such as credit developments and house prices. Empirical analysis suggests that the financial cycle typically lasts longer than the business cycle. [56] De-synchronisation does not mean that business and financial cycles are uncorrelated. It simply means, for instance, that significant risks and imbalances can gradually build up in the financial system even in periods of low inflation and low output volatility. This is what happened during the “Great Moderation”, before the recent financial crisis surfaced. Such a de-synchronisation between the financial and business cycles suggests that, if monetary policy seeks to stabilise the financial cycle, it may take actions which are detrimental to its primary objective of achieving price stability. In addition, seeking to mitigate financial risks by changing monetary policy rates may produce inefficient outcomes. The reason is that variations in policy rates typically influence all sectors of an economy and may therefore be too broad and too blunt a tool http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  to address sector-specific financial imbalances, such as in real estate. Second, to achieve simultaneously price stability and financial stability, is it necessary to have two independent policy domains, each endowed with separate goals and instruments? While monetary policy would aim to guarantee price stability, macroprudential policy aims to ensure financial stability. In particular, within the euro area, as Member States often have heterogeneous business and financial cycles, macroprudential instruments have the advantage that they can target countryspecific imbalances.

The personal independence of members of the ECB’s decisionmaking bodies is also unaffected, as they remain protected from arbitrary dismissal under the Treaty irrespective of the tasks they are exercising. Is the principle of independence under Article 130 of the Treaty applicable to the ECB in its macroprudential role? The last question I would like to analyse is whether the principle of independence under the Treaty is also applicable to the ECB’s role in macroprudential supervision. As a general principle, macroprudential competence lies at the national level. This is a reflection of the principle of conferral that governs the division of powers between the European Union and the Member States. According to that principle, the Union should act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein. [50] Where a competence is not conferred upon the Union in the Treaties, it remains with the Member States. [51]  http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  The primacy of national competence in the field of macroprudential policy is clarified in Article 127(5) of the Treaty, which states that “the ESCB shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the stability of the financial system”. This implies that, in general, the Eurosystem has only a contributory role to the formulation of macroprudential policies.