Sumary of Central banks can’t reduce inequality – it’s time for ministers to act:
- In the Forbes list of the World’s Most Powerful People for 2012, Ben Bernanke, the then chair of the US Federal Reserve, held the sixth position, while Mario Draghi, the then president of the European Central Bank, came in at number eight.
- As the global economy struggled with the aftermath of the global financial crisis that began in 2008, and its European cousin, the eurozone crisis, central banks were in the driving seat, easing quantitatively like there was no tomorrow.
- Although central banks continue to buy bonds incontinently, fiscal policy has been the key response to the Covid-19 pandemic.
- So are central bankers’ noses out of joint as they play second fiddle to the finance ministries, a position in the orchestra to which few aspire?
- It seems that they are, as during the last 18 months there has been a remarkable expansion of the central banks’ fields of activity, largely driven by their own ambitions.
- So they have moved into the climate change arena, arguing that financial stability may be put at risk by rising temperatures, and that central banks, as bond purchasers and as banking supervisors, can and should be proactive in raising the cost of credit for corporations without a credible transition plan.
- Central banks are also trying to move into social engineering, specifically the policy response to rising income and wealth inequality, another hot-button topic with high political salience.
- Central banks have been stung by growing criticism that their policy mix of low or even negative interest rates, combined with quantitative easing, has given the wealthier members of society huge uncovenanted gains by pushing up asset prices.