The world should redefine the role and function of central banks after the COVID-19 pandemic, suggested a former International Monetary Fund (IMF) official, as many central banks are deemed to have crossed “red lines” in dealing with the impacts of the coronavirus.
“In coming years, the world must carefully study solutions and redefine the role of the central bank,” said Zhu Min, a former deputy managing director of the IMF, at an online discussion with Siddharth Tiwari, Chief Representative for Asia and the Pacific of the Bank for International Settlements (BIS), under the theme of “the pandemic and the response of central banks,” on Saturday.
Tiwari noted that the responses from some central banks to deal with the pandemic had crossed “red lines” and needed cautious interpretation to be dealt with.
The central banks need to reflect on their roles in coming years, such as their functions as the lender and market maker of last resorts, Tiwari said.
We have learned in past years that we should not push too much to link fiscal policy and monetary policy. If the ties between the two are too close and boundaries are moved too much, it may affect the independence of the central bank and increase financial fragility, Tiwari said.
Zhu echoed this point, recommending that countries redefine and redesign the functions and roles of central banks so as to secure a stable, fair and transparent financial market.
In a discussion on which direction central banks will take in the future, Tiwari commented that during the pandemic, the central bank’s intervention measures also involved other departments, and that as for where the central banks will go, it is important for them to endure the current crisis first, before worrying about the future.
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