Skip to content

Humbled Central Bankers Scale Back Their Ambitions

After decades of mission creep, the world’s monetary policy makers can regain credibility by getting back to basics.

Central Banks HP 2

Illustration: Patrick Leger for Bloomberg Markets

Once seen as the world’s go-to ­economic crisis fighters, central bankers are now desperately trying to contain a problem they allowed to happen: inflation. That’s eroded their credibility in the eyes of investors and society at large.

Officials have offered mea culpas. US Federal Reserve Chair Jerome Powell acknowledged in June that “with the benefit of hindsight, clearly we did” underestimate inflation. Christine Lagarde, his counterpart at the European Central Bank, has made similar concessions, and Reserve Bank of Australia Governor Philip Lowe said in May that his team’s forecasts had been “embarrassing.” In October, South African Reserve Bank Governor Lesetja Kganyago warned at a monetary policy forum that it takes a long time for central bankers to build ­credibility—but that it can be lost abruptly.