The New Art of Central Banking

This article outlines some of the intellectual lessons learnt by central bankers during the financial crisis. The key question is whether a broader range of policy options than simple inflation targeting has to be considered in order to limit instability. Interactions with overseas pools of savings, government debt markets and financial risk have all conspired to complicate significantly the task of monetary policymaking. These developments do not mean that the target for inflation has to be modified or dropped but that setting policy will be a more complex task and require more explanation than it has in the recent past.