Macro-prudential: if not now when?

At the turn of 2000, when the € was at 0.85, very weak, against the dollar, the then Economic Counselor of the International Monetary Fund, Michael Mussa, issued a statement that made some waves in the monetary world: "if not now when?" [1]. With that statement he made the point that if there was a time when a central bank had to resort to the unusual step of intervening in the foreign exchange market, that time had arrived for the European Central Bank.

Is the ECB a central bank overburdened with risk?

The short answer is: yes, but not of the kind you think.

The long answer starts by noting that in some quarters the financial risk coming from unconventional monetary policies is advanced as a reason for more caution (or cowardice?). For instance, the Bundesbank in the document on the OMT presented to the German Constitutional Federal Court gave quite some weight to this issue [1].