The magnitude of this response is likewise unprecedented. The Federal Reserve (pic) has now expanded its balance sheet beyond US$6 trillion, an increase of almost US$2 trillion in less than a month.
JUST a few weeks into the coronavirus pandemic, the world’s most powerful central banks have found themselves shoved violently back into crisis-management mode.
How they emerge from this latest emergency – and how it affects their political autonomy, mandates and credibility – is less a function of what they do and more of what happens around them.
After a golden age in which central banks were feted for vanquishing inflation, and sometimes even for taming the vagaries of the business cycle, they found their reputations tarnished by the financial crisis of 2008 and the recession that followed. An aggressive “whatever it takes” policy helped them to eventually win that war.
But the prolonged and excessive reliance on them that followed – a result of the failure of most advanced countries to pivot to a more comprehensive policy response – failed to secure the peace.
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