Central banks do not do miracles

Fernando Fernández (IEAF) | Perhaps the moment has arrived to abandon the temptation to arbitrate, to recover humility and discuss what should be the aim of monetary policy.

If it is going to be imposible to create inflation, if creating effective demand is a pointless task in open economies, perhaps financial stability should not be an unquestioned objective. Are we sure that we are paying sufficient attention beyond imposing increasing capital restrictions and requirements and liquidity and solvent assets rules on the banks? Is it posible that the economy can be stable with an unstable banking system? Can the economy be stable with an unprofitable financial system? This is the question that central bankers want to avoid.

More concerned with refining their current strategies and replacing the inflation target with the general price level and nominal growth. But they continue thinking that they are the only players, the only instrument, the guardians of the essences, the necessary stabilisers of financial markets, the guarantors of growth and employment. And so they undermine their own Independence and promise what they cannot deliver. Generating more populism? I would not dare say so, but nor would I exclude it.