, before it is too late. money illusion, for example, may push house prices increasingly away from fundamentals, despite real interest rates not being extraordinarily low. banks may start restricting their lending activities the lower yields are and the flatter the yield curve is, particularly in an environment in which capital buffers may need rebuilding following the coronavirus ( covid - 19 ) crisis. and the larger the share of bonds that we purchase, the higher the risk that market liquidity may deteriorate over time. these concerns raise the question as to whether monetary policy should take financial stability considerations more systematically into account and, if so, how this should be done. one aspect in this context is the optimal interaction between monetary and prudential policies. while macroprudential policies are the first line of defence against the build - up of financial vulnerabilities, it is widely acknowledged that such policies do not yet offer effective protection. a second aspect relates to how a more effective integration of asset price developments into the monetary policy framework could better reflect the role of financial stability in preserving price stability over the medium term. the pandemic is the latest in a series of shocks that vividly demonstrate how financial factors may amplify real shocks, giving rise to huge costs for society as a whole. a third and complementary aspect is the horizon over which we want to bring inflation back to our aim. if shocks to aggregate demand, such as those seen during the pandemic, reinforce downward pressure on prices from long - lasting structural factors, and if the inflation expectations of firms and households are less sensitive than widely assumed, then it could be optimal to lengthen the “ medium term ” when monetary policy is already highly accommodative. by accepting a somewhat slower return of inflation towards their aim, and by focusing more on the duration of policy support, central banks may effectively mitigate potential risks to financial stability arising from a more intense usage of their policy instruments in the pursuit of their mandate. a more elastic use of the “ medium term ” notion might be all the more conducive in an environment in which a high degree of prevailing uncertainty is likely to considerably increase the lags with which policy is transmitted to the real economy. conclusion let me conclude. the pandemic hit the global economy at a time when far - reaching secular changes had already prompted central banks to reflect on the appropriateness of their monetary policy frameworks. covid - 19 has reinforced many of

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