Craig Torres, Jeff Black & Chris Anstey
July 31, 2013
The success of the next Federal Reserve chairman, be it Janet Yellen, Lawrence Summers or someone else, will depend less on their grounding in monetary policy orthodoxy than on their readiness to reach beyond it.
That flexibility defines the leaders of the world’s principal central banks: the Federal Reserve, the European Central Bank and the Bank of Japan. All three responded to economic shocks by casting off institutional dogma and broadening their missions.
At the Fed, Chairman Ben S. Bernanke engineered the most unconventional experiment in U.S. monetary-policy history using trillions of dollars in direct bond purchases to lower long-term interest rates and expanding the central bank’s role as lender of last resort. The ECB’s Mario Draghi pushed the central bank’s goals beyond narrow price stability, pledging unlimited support to countries that sign up for fiscal restructuring. BOJ Governor Haruhiko Kuroda set out to double Japan’s monetary base to end two decades of stagnation.