CENTRAL bankers are under fire. In America, President-elect Donald Trump said that the Federal Reserve chair Janet Yellen should be “ashamed of herself” for keeping rates too low; in Britain, Mark Carney of the Bank of England has been criticised for his views on the economic risks of Brexit; and in Europe, Mario Draghi has faced attacks from critics in Germany (for being too lax) and Greece (for being too tight).
In a new paper Ed Balls, who played an influential role in making the Bank of England independent, has teamed up with James Howat and Anna Stansbury to try to think through the role and wider responsibilities of the central bank. It is very much worth a read and here are my first thoughts (colleagues will doubtless chip in later).
As the paper points out, central bank power has increased in the wake of the 2007-08 crisis, extending well beyond the narrow pre-crisis focus on using interest rate policy to meet inflation targets. But the worry is that
Absolutist interpretations of complete central bank independence may both…Continue readingAdvertisements