An Uncertain Future

Abstract

Central banks operate under uncertain conditions, monetary policy being directed at the future. They can expect to encounter old and new challenges. Their independence has come under renewed pressure and could pose an existential threat in some cases. The successful practice of inflation targeting may need to be modified and new monetary tools developed. Several possibilities are discussed. New financial crises are likely to materialize and should be detected at an early stage. Wait-and-see policies can do serious harm. Trade and currency wars could escalate, requiring a central bank response. Payments systems are undergoing drastic changes which should be addressed. Serious military clashes would call for emergency monetary measures. The international monetary system may come under strain with unpredictable consequences. Central banks are taking climate change seriously and cooperating on how to deal with the financial fallout. Much more may be needed.