Finance — Business

Central banks reorientating focus leads to changes on our website.

Central banks altering their focus may lead to a persistently higher inflation rate, according to Darren Williams and Guy Bruten of Alliance-Bernstein.

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2025 September 12 . 11:15 AM

1 min read

Central banks rearranging their focus impacts our website

Central banks reorientating focus leads to changes on our website.

Central banks, traditionally tasked with ensuring price stability, have taken on a more expansive role during the COVID-19 pandemic. In an effort to support economies, they have relied on massive balance sheet expansions and bond purchases, a trend that has been most prominent with the Federal Reserve (Fed) and the European Central Bank (ECB).

This intervention has allowed debt levels to reach record peacetime highs over the past 18 months. However, this increased monetary stimulus has also contributed to the potential for a significant increase in inflation.

Inflation, historically, has often emerged indirectly as a result of political decision-makers pursuing other goals. The green transition is one such area where central banks are now involved, aiming to support this shift while also reducing inequality.

Despite this, central bankers in developed countries still aim for an inflation target of around 2 percent. However, recent speeches suggest they might be losing sight of this target, a concern that arises as priorities may be shifting.

It's important to note that inflation, in this context, is not a deliberate attempt to boost prices. Rather, it's a byproduct of the economic measures taken to combat the pandemic and support recovery.

The Fed, for instance, has implemented asset purchase reductions more aggressively since late 2021, while the ECB has acted more cautiously and slower to tighten monetary policy.

Central banks' actions have been crucial in helping economies weather the pandemic storm. Yet, there is a risk that inflation control may be sidelined in favor of more pressing concerns. As the economic landscape continues to evolve, it will be interesting to see how central banks balance their traditional role with their newfound responsibilities.