Simon Wren-Lewis has just asked the important question of whether their bad policies will erode central banks’ independence from political interference.
He identifies three major central bank mistakes:
their failure to see the crisis coming (which he rightly asserts that they were best placed to see);
their unwillingness to warn that they had run out of ammunition — hit the so-called “zero lower bound” on interest rates — so that fiscal policy should be used to stimulate economies instead (and ward off premature budget tightening);
and their unwillingness to stimulate growth more today.
If central banks repeatedly commit errors that cause so much harm to the economy, Wren-Lewis argues, it becomes hard to justify their independence from electoral politics to citizens.
Central banks cannot escape the searchlights
Martin Sandbu FT 11 April 2016