In recent years, a key challenge for central banks has been the shrinking room for policy manoeuvre as interest rates have declined to historical lows in many countries. The Covid-19 pandemic has inevitably exacerbated the problem. Once the worst is over, rebuilding policy space will be critical. This column presents a theoretical model in which the impact of monetary policy on financial vulnerabilities can complicate that challenge by constraining policy choices down the road. The model includes two realistic features typically excluded from standard setups: banks create money, and lending behaviour generates endogenous booms and busts. As it turns out, in such a framework the very notion of a natural rate of interest driven by saving and investment comes into question.