Central Banks’ Outdated Independence
In the post-crisis world, advanced-country central banks’ goals are no longer limited to price stability. This shift has inevitably reduced central-bank independence, because the pursuit of GDP growth, job creation, and financial stability are clearly political decisions, which should not be made by unelected officials.
BUENOS AIRES – The global financial crisis has raised fundamental questions regarding central banks’ mandates. Over the past few decades, most central banks have focused on price stability as their single and overriding objective. This focus supported the ascendancy of “inflation-targeting” as the favored monetary policy framework and, in turn, led to operational independence for central banks. The policy was a success: the discipline imposed by strict and rigorous concentration on a sole objective enabled policymakers to control – and then conquer – inflation.
BUENOS AIRES – The global financial crisis has raised fundamental questions regarding central banks’ mandates. Over the past few decades, most central banks have focused on price stability as their single and overriding objective. This focus supported the ascendancy of “inflation-targeting” as the favored monetary policy framework and, in turn, led to operational independence for central banks. The policy was a success: the discipline imposed by strict and rigorous concentration on a sole objective enabled policymakers to control – and then conquer – inflation.