Central banks should resolve to adopt a more humble approach

Rich-economy central bankers ought to learn from their emerging-market counterparts who framed better policy responses

- JACOB FRENKEL, RAGHURAM G. RAJAN & AXEL A. WEBER

As the world continues to experience a prolonged period of unanticipated inflation caused by economic and non-economic shocks over the past four years, it is time for a frank reassessment of central banking and monetary policy. It is time to acknowledge what we got right and where we went wrong, to recognize the limits of our data and understanding, and to own up to the weaknesses of our models and frameworks. Above all, it is a time for humility, and for a return to core goals.

Central banks cannot solve all that ails our economies. They should not be expected to solve problems that other actors can better address, such as collective global goals outside their fields of competence. Instead, they should focus on three objectives: price stability, financial stability and macro-economic stability. Achieving these is hard enough. We should dial back public expectations that central banks can or should do more.