commanders central banks industrialized countries have largely lost the respect they enjoyed from the general public. More recently, however, they were seen as heroes supporting weak growth through unconventional monetary policy, facilitating the hiring of minorities, allowing the market to Job work with some overheating and even try to contain it changing of the climatewhile also criticizing stalled parliaments that have done little more. Now they are being blamed for failing in their primary task of preserving it. inflation low and steady. Politicians who have smelled blood and distrustful of the unelected authorities want to revise the mandates of central banks. Undoubtedly, their leaders were slow to respond to the growing signs of inflation. In an effort to stimulate too low inflation, US Federal Reserve Bank, for example, even changed its structure during the pandemic, announcing that it would be less responsive to expected inflation and would support quantitative easing longer. This scheme was suitable for a time of structurally low demand and weak inflation, and was wrong when inflation was about to start. The central bank lowers inflation, slowing down economic growth.

His policy must be regarded as reasonable, otherwise he will lose his independence. With governments spending trillions to prop up their economies, employment barely recovering from a horrendous low, and inflation barely noticeable for more than a decade, only a stupid president/central banker could increase the cost of borrowing. Central banks needed citizens to see higher inflation in order to fight back. In short, the hands of the central banks were tied in different ways, although their previous actions limited the room for maneuver. For example, there is an example where the central bank acts to cover the government’s fiscal spending, but also one where the central bank succumbs to the dictates of the market.

It is clear that they are not related to the actions of central banks in recent years. In short, while they too may claim to have been surprised by recent events, they themselves have played a role in limiting the scope of their policies. So what is happening now? Central banks are well aware of the fight against high inflation and have the tools to fight it. They must be free in their work. In addition, central banks are not obvious institutions for combating climate change or promoting integration. They often do not have such guidelines in their subject-specific authority. But what about their mandate and their price stability system? According to Agustin Carstens, CEO of the Bank for International Settlements, a low inflation regime can be very different from a high inflation regime, and depending on the contract, their structure may need to be changed.

In conclusion, it should be noted that the mandates of central banks should not be complicated, but they may need a stronger mandate to maintain financial stability.

*Professor at the Booth School of Business Administration at the University of Chicago and former Governor of the Bank of India. The article was published on the IMF blog.