How does central banks’ policy change in new global economic conditions?

On January 17, the second day of the Gaidar Forum, RANEPA hosted an open dialogue, Reflections on Central Banking, Protectionism and Globalization, sponsored by the Russian English-language magazine of the Central Bank, Russian Journal of Economics.

The session moderator, First Deputy Governor of the Central Bank of Russia Ksenia Yudaeva, outlined the topic for discussion, listed the main issues lying at the confluence of economics and economic policy: “How does the policy of central banks change? How should it change in the new global economic conditions?” Over the past few years, central banks have pursued a policy aimed at keeping inflation low by using a standard instrument – the interest rate. “However, today, with low or nearly zero interest rates, regulators begin to use non-standard tools, including balance management policies, negative interest rates, and communications,” the moderator noted. Considering this trend, the question is: “How much of their non-standard approach should return to the standard option, if at all?”

Chairman of JP Morgan Chase International Jacob Frenkel was the first to try to answer the questions. The expert shared his view of the evolution of the theory and practice of central banks, the problems of globalization, the emergence of protectionism and the growth of populism. “We have lived through major economic changes,” he said. The consequences of the 2009 crisis, which rendered the standard measures regulators use to preserve banks’ solvency and stabilize the market inadequate, have led them to use non-standard monetary policies. Initially planned as short-term and temporary solutions, these methods have remained in use. According to the expert, this process entails a long list of risks: companies accumulate risks in their portfolios; organizations stop making direct investments and prefer portfolio investment; and labor productivity declines. “We need to evaluate the costs d benefits of normalizing the monetary policy,” the speaker said. He also outlined his position on keeping global inflation standards at 2%. At the end of his speech, Jakob Frenkel stressed: “I believe that the monetary policy system is ready for normalization. Non-standard measures should be temporary, while normalization involves a return to the old standards.”


The organizers include the Presidential Academy of National Economy and Public Administration (RANEPA), the Gaidar Institute for Economic Policy (Gaidar Institute) and the Association of Innovative Regions of Russia (AIRR).

The program outline is available at the forum website.

Participation is free; preliminary registration is required.

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