Central Banking beyond Inflation

Benjamin Braun

Until recently, best practice in central banking was firmly anchored in the “holy trinity” of inflation targeting: price stability as the primary goal, central bank independence as the institutional arrangement, and the short-term interest rate as the instrument of monetary policy. The common thread that runs through this project is an interest in the political economy of central banking in a post holy trinity world. What instruments do central banks actually use, and how do they justify their use of those instruments? Do central banks engage in strategic, legitimacy-seeking behavior, even though independence should shield them from political pressure? In light of the megachallenges of global warming and inequality, how can we rethink – and redeploy – the power of central banking?