Central Banks Report: Return to your rules, please

As the extraordinary era of quantitative easing draws to an end, central banks are re-evaluating policy. Whichever way they go, don't be caught out.


In the wings: Who’ll be the next ECB president when Mario Draghi moves on next year? Source: Ollo/gettyimages

It’s been an extraordinary era of central-bank macro-management where a “whatever-it-takes” mantra has prevailed among the policymakers. But the easy-money tap is slowly closing and central bankers are searching for a new way forward. In our first Central Bank Report, we argue that the rules that defined policy pre-2008 might work best as normalisation returns to vogue.

Return to rule
A decade of crisis-era monetary policy is drawing to an end. What’s next? We might be on the brink of a return to ‘old-school’ policy rules abandoned in the wake of the Great Financial Crisis of 2008/09.

The ‘new’ norm 
Policy rules suggest current policy rates are too low. When central bankers draw the same conclusion, rate hikes could come thick and fast. Forewarned is forearmed.

Better decision-making
Narrow inflation targetting could be set to end as the era of prioritising price stability fades. That could lead to better decision-making even if some, like the Riksbank, might prove stubborn.

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