IDEAS home Printed from https://ideas.repec.org/a/ecb/ecbmbu/202500311.html
   My bibliography  Save this article

Macroprudential and monetary policy interaction: the role of early activation of the countercyclical capital buffer

Author

Listed:
  • Detken, Carsten
  • Hempell, Hannah S.
  • Pirovano, Mara

Abstract

Amid changes in the global macro-financial environment, macroprudential policy within the banking union and beyond has increasingly prioritised the proactive enhancement of resilience. This article argues that this shift towards a more pre-emptive implementation of macroprudential policy has enhanced its complementarity with monetary policy. A sufficiently resilient financial sector is essential to exclude conflicts between price stability and financial stability, the respective primary objectives of monetary and macroprudential policies, as highlighted in the latest 2025 ECB’s monetary policy strategy statement. Without sufficient resilience, monetary policy could at times negatively affect financial stability, for example when the monetary policy stance remains very accommodative for extended periods or undergoes significant tightening over a short time span. In particular, the early activation of the Countercyclical Capital Buffer (CCyB) fosters banking sector resilience by ensuring the availability of sufficient capital that can be released in the event of (also non-financial) shocks. This approach supports monetary policy to focus solely on its primary objective of price stability, thereby largely eliminating the potential for conflict between price stability and financial stability. JEL Classification: E52, E61, G28

Suggested Citation

  • Detken, Carsten & Hempell, Hannah S. & Pirovano, Mara, 2025. "Macroprudential and monetary policy interaction: the role of early activation of the countercyclical capital buffer," Macroprudential Bulletin, European Central Bank, vol. 31.
    • Handle: RePEc:ecb:ecbmbu:2025:0031:1
    Note: 229418
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//press/financial-stability-publications/macroprudential-bulletin/html/ecb.mpbu20250818_01.en.html
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbmbu:2025:0031:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.