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Central Banks in the Field of Tension Between Fighting Inflation and Financial Stability

Press Release October 2, 2012

The financial crisis of the years 2008 and 2009 has thrown the hitherto applicable monetary policy consensus of the central banks into disarray. Until the start of the crisis, the joint objective was fighting inflation with a flexible outlook, now their monetary policy has been extended to create financial stability. And this can mean a conflict of objectives.

"During crisis times central banks can absolutely function as emergency service," says Björn van Roye, an Institute for the World Economy expert. They can then employ their diverse box of tricks in order to manage solvency issues. "Even if central banks are facing additional challenges as a consequence of the crisis price stability has to remain their primary objective," demands van Roye. Conflicts of interest must not even arise in the first place.

After the international financial crisis, to what extent is re-interpretation of monetary policy principles needed? Should central banks extend their objectives and not only pursue the fight against inflation, but also pursue financial stability? How should central banks deal with potential conflicts of objectives? These and further questions will be discussed at the Global Economic Symposium in Rio de Janeiro, 16 October to 17 October 2012, which is expected to be attended by 600 experts from the fields of politics, science, economy and society.

“The Global Economic Symposium (GES) 2012 is being jointly organized by the Kiel Institute for the World Economy (IfW) and the Bertelsmann Stiftung, in cooperation with the German National Library of Economics – Leibniz Information Centre for Economics (ZBW) and in collaboration with the Fundação Getulio Vargas (FGV).

Further information can be found at and at the official GES-blog at

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Björn van Roye

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