Central Banks in the "New Normal"
This fall, Credit Suisse Research Institute brought together monetary policy experts, including Professor Joseph E. Stiglitz, Professor Nouriel Roubini, Jean-Claude Trichet and Sir Paul Tucker to share their views on the effectiveness of today's monetary policies and the future role of central banks.
The Credit Suisse Research Institute (CSRI) is Credit Suisse's in-house think tank, which focuses on trends that shape the world of today and impact the world of tomorrow. During this fall's meeting the CSRI – together with leading monetary policy experts – discussed the future of monetary policy as well as key challenges central banks face going forward.
Thanks to thought provoking discussions and detailed analyses, the meeting was invaluable for all participants including key strategic clients and senior CS decision makers: "It is all in attempt to get a better view as to how we should read the road forward and to be in a better position to advice our clients on their investment ideas," says Urs Rohner, Chairman of the Board of Directors of Credit Suisse Group AG and Chairman of the Credit Suisse Research Institute.
Since the 2008 financial crisis, central banks have implemented various monetary policies, such as quantitative easing and negative interest rates, which according to Professor Nouriel Roubini were absolutely "needed to avoid double-dip recession and deflation". Though the effectiveness of decisions taken is difficult to measure, it seems that central banks cannot cope with the challenges posed by slow economic growth on their own. "Central banks can't conger prosperity, growth and productivity improvements out of thin air. Monetary policy buys time, it brings spending forward, but the heavy lifting in the real economy has to be done by governments and businesses," says Sir Paul Tucker, former Deputy Governor of the Bank of England.
What is the future role of central banks and what challenges can be seen down the road?
According to the former president of the European Central Bank, Jean-Claude Trichet "the most important [challenge] is to convince other partners: the governments, the parliaments, the private sector, the social partners to step in (…) otherwise we will only pave the way for the next difficulties, if not the next big crisis."
Nobel Prize Winner, Professor Joseph E. Stiglitz points out that the post-2008 decisions of central banks have had substantial influence on their own future. "They have now put themselves in a position that to restore monetary policy to a 'more normal' condition will itself post challenges to the global economy."