The reputation of central banks has always had its ups and downs. For years, central banks’ prestige has been almost unprecedentedly high. But a correction now seems inevitable, with central-bank independence becoming a key casualty.
Central banks’ reputation reached a peak before and at the turn of the century, thanks to the so-called Great Moderation. Low and stable inflation, sustained growth, and high employment led many to view central banks as a kind of master of the universe, able – and expected – to manage the economy for the benefit of all. The depiction of US Federal Reserve Chair Alan Greenspan as “Maestro” exemplified this perception.
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The 2008 global financial crisis initially bolstered central banks’ reputation further. With resolute action, monetary authorities made a major contribution to preventing a repeat of the Great Depression. They were, yet again, lauded as saviors of the world economy.
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