Per Jansson: Independent guidance from central banks has become even more important

"Central banks must be able to clearly communicate and justify their monetary policy for it to be effective and predictable,” said Mr Jansson in a speech, during which he also commented on the recent debate on central bank independence. Nevertheless, in recent years several central banks seem to have become less inclined to use so-called forward guidance to convey to economic agents how they intend to conduct monetary policy in different circumstances going forward. 

This may be due to the bad experience of the global rise in inflation or to the fact that it has become more difficult to make accurate forecasts in a more uncertain world.

“It would be unfortunate if it turned out to be a lasting phenomenon. If the world has indeed become more turbulent, transparency and forward guidance are even more important.”

It could also be that central banks are withholding their forward guidance because they fear that their forecasts and analyses are politically inconvenient. That would be very worrying, according to Mr Jansson.

“Central banks have been delegated their task by democratically elected politicians – to keep inflation low and stable and the real economy in good balance. They do this by deciding the policy rate independently,” he said. 

“Of course, a central bank would also find it difficult to do its job well if it were to pay too much attention to politics and ‘tiptoe around’ so as not to annoy politicians and ultimately jeopardise its independence.”

According to Mr Jansson, independence is a necessity if monetary policy is to be sustainable in the long term.

“To my knowledge, there is no example of any economy performing better when central bank independence has been reduced and monetary policy has been politicised. However, there are many examples to the contrary.”