Fiscal dominance: are central banks about to be Trumped?
Jagjit Chadha highlights the danger of an ‘upper bound’ on interest rates as fiscal strains grow
The primary objective of monetary policy since the early 1980s has been price stability. With the Deutsche Bundesbank in the vanguard – and following the Volcker deflation at the Fed in the early 1980s – the disinflation path of advanced economies during that decade not only clarified the role of monetary authorities but also paved the way for operational central bank independence. Under this emerging regime, monetary policy was active in the sense that policy rates could be moved wherever they
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