Expansionary monetary policy inherently leads to asset price distortions

Expansionary monetary policies give rise to a number of distortions between: Interest rates and the growth rate; Risk and risk premia; Share prices and corporate fundamentals. It is important to understand that these distortions are an inherent feature of expansionary monetary policy. They have a significant cost: it becomes impossible to accurately value assets; risk is insufficiently remunerated; the information that asset prices usually contain about companies is erased. The size of these costs begs the question as to whether monetary policy should really be a countercyclical instrument.