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2016-04-11

It is very damaging that the idea has been allowed to take hold that central bankers cannot or should not do more.Sandbu Wren-Lewis


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

Can central banks make 3 major mistakes in a row and stay independent?




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