Central banks should respond to falls in equity markets

In the past, central banks’ interest rate-setting (we look at the Federal Reserve and the ECB) has not included a reaction to equity market fluctuations . Yet sharp falls in share prices, like the one that has just happened, have very negative effects on economies: Fall in demand due to the wealth effect on households and companies; Above all, a disincentive to use equities to finance the economy ( due to the reactions of both investors and companies); Disruption in the measurement of companies’ value. It would therefore be useful if, despite their reluctance, central banks intervened to correct deviations in share prices when they are clearly abnormal.