Central banks changes focus leading to impact on our online platform

Central banks around the world are facing a significant shift in their priorities, with a potential risk of losing sight of their traditional focus on inflation control. This change is largely due to the expanded mandates they have been given in recent years, as they are now tasked with supporting the green transition and reducing inequality, among other objectives.

Historically, inflation has often been a byproduct of political decision-makers pursuing other objectives, rather than a deliberate attempt to increase prices. This trend seems to be continuing, as central banks, particularly in industrialized countries, are indicating a potential shift in focus away from the 2% inflation target.

One of the most notable examples of this shift can be seen in the speeches of Jerome Powell, the Chair of the Federal Reserve (Fed), who has given indications in recent speeches that the Fed might consider adjusting its monetary stance and possibly lowering interest rates despite persistent inflation risks. In contrast, the European Central Bank (ECB) has clearly stated it remains committed to keeping inflation anchored around its 2% target and has not signaled any loss of focus on inflation control.

The Covid-19 pandemic has necessitated massive balance sheet expansions and bond purchases by central banks, forcing them to broaden their roles and responsibilities. The pandemic has also led to record peacetime highs in debt levels due to government support and central bank interventions.

While central bankers have not explicitly stated deliberate attempts to boost prices, their focus on other objectives, such as reducing inequality and supporting the green transition, may indirectly lead to inflation. Inflation often emerges as a result of pursuing other objectives rather than as a deliberate policy.

Central banks are at risk of sidelining inflation control in favor of more pressing concerns due to their expanded mandates. This potential shift in focus could lead to a significant increase in inflation, as the current focus of central bankers on objectives beyond price stability may contribute to a shift in their priority from inflation control.

However, it's important to note that there are no known instances where high inflation was a direct intent of central bankers. Inflation control was previously a central focus for central banks, but its priority may be shifting amidst various challenges. Central banks have played a significant role in allowing governments to support their economies during the Covid-19 pandemic, and this role may continue to evolve in the future.

In conclusion, while central banks are facing a potential shift in their priorities, it's crucial for them to maintain a balance between their expanded mandates and their traditional role of controlling inflation. Ensuring price stability remains a key aspect of maintaining a healthy and stable economy.