Government Struggles to Control Asset Price Fluctuations in Capital Markets
The development of capital markets affects how monetary policy works. Governments may want to control price changes in these markets, but it's hard to tell if prices are changing for good reasons or not. Adjusting monetary policy tools doesn't always help with price bubbles in assets. It's also tricky to include asset prices in monetary policy decisions because of how prices are calculated and the many goals of monetary policy. To keep inflation stable, it's best to only interfere when asset prices affect expected inflation rates.