Central banks told: Expand focus from inflation to crisis prevention

MANILA, Philippines—Central banks need to switch their focus from short-term crisis management to long-term efforts aimed at resuming sustainable and inclusive growth and crisis prevention.

This was one of the conclusions reached at a recent recent international forum of monetary regulators which urged policy makers around the world to expand their horizons from inflation control to protecting financial systems from market shocks.

At an online briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said these insights emerged during the Reinventing Bretton Woods Committee (RBWC) research conference last month.

The conference had the theme “Shifting Gears, Changing Lanes: Central Banking in a Post-Covid Economic World” and was sponsored by the BSP.

“The major challenge for central banks is how to prevent the next crisis by creating an institutional setting that will enable us to deal with the next crisis,” Diokno said.

The research conference also pointed out that while central banks should continue to pay attention to price stability, there might be more risks to financial stability and that central banks should be prepared for the exit strategies of advanced economies.

The BSP International Research Conference is a biennial event that engages central bankers and leading experts from the academe in the discussion of emerging and pressing policy issues.

Speakers for the 2021 conference, the first to be co-hosted by the BSP and RBWC, included:

• Dr. Jakob Frenkel, chair of the Board of Trustees of the Group of Thirty and former governor of the Bank of Israel
• Former US Treasury Secretary Lawrence H. Summers
• James Bullard, president of the Federal Reserve Bank of St. Louis

The high-level conference discussed central banking and dealing with the enduring impact of COVID-19, new monetary policy era for emerging markets, forecasting future crises and payment innovation, financial inclusion and financial stability risks.

It also tackled monetary sovereignty and the path towards digitalization of money, central banking in a post-COVID economic world, climate change risk as a redefining issue for financial stability, and the global economy post-COVID.

RBWC is a non-profit organization that orchestrates an open and cross-national dialogue among high-level stakeholders committed to promoting a stable global financial architecture and helping key institutions prepare for changes in the economic landscape.

TSB