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Opinion
Tyler Cowen

Yes, the Fed Could Still Stop a Recession

The world’s central banks have a lot of power. What's changed is their willingness to use it.

More powerful than it appears.

More powerful than it appears.

Photographer: Bloomberg/Bloomberg

As interest rates fall and negative yields proliferate, concern is growing that central banks have lost their power to conduct monetary policy. Former U.S. Treasury Secretary Larry Summers suggested as much in a recent tweet storm, while Adair Turner, former head of the U.K. Financial Services Authority, recently published a column titled, “Central Banks Have Lost Much of Their Clout.”

This is a canard. Central banks still have more power to influence the economy than almost any other institution in public life. The question isn’t how they lost their clout but why they haven’t tried to use the clout they have.