## New Worries for Central Bankers

_IMF Blog, March 1, 2023_

## Source details

**Canonical URL:** [New Worries for Central Bankers](https://www.imf.org/en/blogs/articles/2023/03/01/new-worries-for-central-bankers)

## Other formats

- [Markdown version](/en/blogs/articles/2023/03/01/new-worries-for-central-bankers/index.md)
- [Structured JSON version](/en/blogs/articles/2023/03/01/new-worries-for-central-bankers/index.json)
- [Bundle manifest](/en/blogs/articles/2023/03/01/new-worries-for-central-bankers/bundle-manifest.json)

## Bibliographic details
- Authors: Gita Bhatt
- Published: March 1, 2023

---

### Overview and framing
- Publication: Finance and Development magazine issue introducing evolving challenges for central banks.
- Author: Gita Bhatt.
- Date: March 1, 2023.
- Opening quote: “The job of the central bank is to worry.” — Alice Rivlin, vice chair of the Federal Reserve Board in the 1990s.
- Core assertion: Inflation is now one of several worries; structural forces and a rapidly changing economic backdrop have complicated monetary policy and reduced maneuvering room.

### Key structural forces complicating monetary policy
- Deglobalization.
- Climate change.
- Aging populations.
- Advent of digital money.
- Political pressure on central bank mandates and independence.

### Diagnostics and model limitations
- IMF’s Gita Gopinath: Economists need improved tools after existing models missed the recent inflation surge.
- Markus Brunnermeier (Princeton): Post-pandemic world characterized by higher inflation, lower growth, and more debt, yet central banks are using policies modelled for tepid inflation, low interest rates, and robust growth.
- Greg Kaplan, Benjamin Moll, and Giovanni Violante: New economic models illuminate monetary policy’s influence on income and wealth distribution.

### Views from central bankers and former central bankers
- Masaaki Shirakawa (former governor, Bank of Japan): Time to reconsider the foundation and framework for monetary policy, with attention to national differences.
- Raghuram Rajan (former governor, Reserve Bank of India): Advocates “less is more”—central banks should refocus on price stability while respecting financial stability.
- Giancarlo Corsetti (European University Institute): Exceptional circumstances such as the pandemic may justify temporary monetary–fiscal cooperation, but never at the cost of independence.
- Philip Lane (European Central Bank): Discusses euro area inflation and the challenge of shrinking the ECB’s balance sheet.
- Lesetja Kganyago (South African Reserve Bank), Sukudhew Singh (former deputy governor, Bank Negara Malaysia), Leonardo Villar (Colombia’s central bank): Provide perspectives on fiscal–monetary interaction, foreign exchange intervention, and inflation targeting.
- Karnit Flug (former governor, Bank of Israel): Emphasizes central bank accountability and transparency.

### Governance, communication, and credibility
- David G. Blanchflower and Andrew T. Levin (Dartmouth College): Recommend ways for central bankers to avoid groupthink, which can threaten credibility.
- Michael Weber (University of Chicago): Surveys show improved monetary policy communications can shape expectations.

### Implications and questions for policy frameworks
- Monetary policy may need to be rethought given changing macroeconomic and structural conditions.
- National differences matter; one-size-fits-all frameworks may be inadequate.
- Trade-offs between price stability and financial stability need clearer prioritization.
- Temporary coordination between monetary and fiscal authorities can be viable in exceptional circumstances, but preserving central bank independence is paramount.
- Better models, communication strategies, and safeguards against groupthink are necessary to restore and maintain credibility.

*Source: New Worries for Central Bankers, Finance and Development article by Gita Bhatt, March 1, 2023.*

---


## References

- [Finance and Development magazine](https://www.imf.org/en/Publications/fandd)
- [Gita Gopinath](https://www.imf.org/en/Publications/fandd/issues/2023/03/crisis-and-monetary-policy-gita-gopinath)
- [Masaaki Shirakawa](https://www.imf.org/en/Publications/fandd/issues/2023/03/POV-time-for-change-masaaki-shirakawa)
- [Markus Brunnermeier](https://www.imf.org/en/Publications/fandd/issues/2023/03/rethinking-monetary-policy-in-a-changing-world-brunnermeier)
- [Raghuram Rajan](https://www.imf.org/en/Publications/fandd/issues/2023/03/Central-Banks-less-is-more-raghuram-rajan)
- [Giancarlo Corsetti](https://www.imf.org/en/Publications/fandd/issues/2023/03/an-unconventional-collaboration-giancarlo-corsetti)
- [David G. Blanchflower and Andrew T. Levin](https://www.imf.org/en/Publications/fandd/issues/2023/03/diverse-views-in-monetary-policy-blanchflower-levin)
- [Greg Kaplan, Benjamin Moll, and Giovanni Violante](https://www.imf.org/en/Publications/fandd/issues/2023/03/modern-monetary-policy-kaplan-moll-violante)
- [Michael Weber](https://www.imf.org/en/Publications/fandd/issues/2023/03/shaping-expectations-michael-weber)
- [Philip Lane](https://www.imf.org/en/Publications/fandd/issues/2023/03/CAFE-ECON-on-inflation-front-line)
- [Lesetja Kganyago](https://www.imf.org/en/Publications/fandd/issues/2023/03/POV-south-africa-a-road-well-traveled-lesetja-kganyago)
- [Sukudhew Singh](https://www.imf.org/en/Publications/fandd/issues/2023/03/POV-malaysia-the-case-for-intervention-sukudhew-singh)
- [Leonardo Villar](https://www.imf.org/en/Publications/fandd/issues/2023/03/POV-Colombia-sticking-to-the-target-leonardo-villar)
- [Karnit Flug](https://www.imf.org/en/Publications/fandd/issues/2023/03/trenches-embrace-debate-karnit-flug)

_Source: https://www.imf.org/en/blogs/articles/2023/03/01/new-worries-for-central-bankers_