Central banks are facing growing pressure from digital currencies, trade-offs between growth and inflation and the politicization of their role.
How are central banks rethinking the monetary tools needed to meet this moment and ensure economic stability?
This session was developed in collaboration with CNBC.
This is a livestreamed session. Please arrive 15 minutes early as the doors will close at the scheduled time.
At Davos, central bankers and an academic converged on a simple message: the toolkit is largely sufficient, but legitimacy and disciplined boundaries are now the binding constraints. Bundesbank President Joachim Nagel argued the Eurosystem has “all the instruments” and that the best support for growth is “conditio sine qua non” price stability, while warning that extraordinary times cannot become an excuse for permanent fiscal slippage under Europe’s Stability and Growth Pact. Swiss National Bank Chair Martin Schlegel rejected the premise of “beyond the mandate,” insisting central banking must remain anchored in a “narrow mandate” where independence is a precondition for credibility: “difficult to earn… very easy to lose.” Israel’s Governor Amir Yaron drew a sharp line between monetary stance and crisis plumbing: rates set stability; liquidity tools repair transmission; solvency belongs to fiscal authorities. He defended “boxed” interventions—capped, time-limited actions—to avoid quasi-fiscal blur, citing Israel’s “up to $30bn” FX backstop that required only $8.2bn and was paired with a refusal to cut rates for consistency. Kellogg’s Janice Eberly highlighted an unresolved frontier: balance-sheet policy lacks a clear framework even as large central bank balance sheets complicate responses to liquidity stress. The panel’s core risk was political assault on central bank independence, especially in the US; fiscal dominance temptations via inflation were described as both unpopular and often ineffective given debt maturity structures.
Ladies and gentlemen, these are extraordinary times. And this is an extraordinary panel to discuss. One of the key issues, which is do central banks have the tools available to cope with what seem to be extraordinary times? And what I want to also get into is, is the historical perspective, meaning that actually these aren't quite as extraordinary times as they feel at the moment. To this journalist who's been in and around markets for 40 years, they do appear to be unprecedented, central banks facing growing pressure from all kinds of areas as well, digital currencies, trade offs between growth and inflation, and publicizing of their role. How are central banks rethinking their monetary tools needed to meet this moment and ensure economic stability? I have told my panel that they can take this pretty much any way they want, because there are so many big issues to cover here as well. And it's, very nice to see. And yet another eminent central banker in the front row as well, who I'm sure will be very interested in seeing what they have to say. Growing pressure from all directions, was it ever the case or unprecedented now? New threats, new challenges, left, right and center. Central banks, rethinking the tools. The threat to independence. I will ask the panel about that as well. I know that carte blanche, central bankers from around the world have rushed to the defense of, Lisa Cook. But most recently, of course, Jay Powell, for the extraordinary assault that the fed finds itself under at the moment, fiscal dominance. I know that's something that Jan, has a very strong view on as well. So maybe we'll visit that government budget deficits, dictating monetary policy. Again, do we have the tools to cope? Is it a worsening probability problem? Their investors losing confidence, creating potential credibility gaps as well. Proliferation of digital assets, crypto evolution of payment systems. Central banks exploring CBDC as well. Digital currencies to safeguard monetary sovereignty as well. Are we constrained to constrained. Is there enough growth happening to work our way out of some of these deflationary issues as well? And do central banks need to revisit their tool kits as well? I'm going to go straight into this as well and just ask a very basic question down the line to the panelists, and I'll start off with Joachim and I'll work my way down here as well. Joachim, do you have the tools, given the extraordinary events, the extraordinary proliferation of different factors and different concerns that you have at the moment, do you have the tools to actually create cohesive and monetary policy, which is basically going to soothe a lot of the nerves for the markets, for investors, for societies?
Thank you very much for attending for for having the chance to attend here this this great panel with my esteemed colleagues. I think over the last 25 years, I think the euro system showed that we have all the instruments, that our toolkit that we we enrich the toolkit over the time. And we did over the time, everything to conduct monetary policy in a way that we try to achieve our target, coming back to 2%. And over the last three years now we are we did a lot. And, we showed our flexibility. And definitely we do have the tools to do what is necessary to fulfill our mandate.
As fiscal, in Germany especially, I guess people are focusing on the fiscal side of things more than ever now. The responsibility of various governments over the years has been in marked contrast to what we've seen elsewhere, not only within Europe, but also globally as well. Is the new fiscal spending that we're seeing in Germany going to create more problems for the Bundesbank and for the ECB?
Well, you alluded to that in your introductory statement. We are living in extraordinary times. And, I believe it was necessary that Germany, the German government, came up with such a big fiscal package. And I think it is necessary still, it is necessary to do what we can to to do everything, to do more on the defense side, but also what is necessary on the infrastructure side. So I think this large fiscal package will come with a positive effect, especially it starts this year. We will see more in in 2027. But the government did it right to to really launch this large fiscal package.
Is the ECB doing enough, for its secondary mandate, price stability, of course, being the first to support the broader goals of higher employment and environmental protection.
I think, first of all, we have to fulfill our first mandate. Is it the most important one? Price stability. Here, here, here, we are close to our target. And I guess the best thing, what the central bank can do to get to a higher level of growth is fulfilling the first mandate price stability. This is the conditio sine qua non for all what is necessary to really have all the good things that we need to come to a higher growth path. And so I believe, yes, we are doing a lot to support the governments, but at the end we are independent central banks within the euro system. So first of all, price stability. This is key.
I'll come back to independence in a few moments time. I also realized I haven't done the introductions. I assumed you knew everybody. Everybody. But I'll just remind you, this is Yoakam, who's the president of the Deutsche Bundesbank. I think you know that. Francois knows that. Anyway, let me move on to Janice Eberly, who is the James R and Helen D Russell Professor of Finance at the Kellogg School of Management, USA, and has an extraordinary resume as well, working with various administrations as well, of course, not least the assistant secretary of Treasury for Economic policy and chief economist, US Treasury under the Obama administration in I think, 2013. Was it? Yeah. Do you think that the Federal Reserve at the moment has the tools available necessary to carry out its mandate?
It's an interesting time to ask that question, because the the fed has just gone through a framework review and its 2020 framework, the focused on the set of issues that were post-financial crisis. So low levels of inflation close to the zero lower bound, and slow recovery from the financial crisis in labor markets. So the 2025 review, sort of looked back at a period of much higher inflation, a stronger labor market once we got past Covid. And so they they pivoted much more than people expected, I think, because it's hard for a large institution to introspect and, and make changes that are visible to the public. And they they shifted the mandate to sort of broaden out from beyond the Post-financial crisis episode and allow for decision making that was sensitive to what's happened to the economy, but not limiting the tools to the current situation. So now they have the same tools of monetary policy. But the thing we could come back to if you want, if others are interested, is that the thing they didn't touch, which many of them, myself included, asked about, was a framework for balance sheet policy. So when you talk about the range of tools, balance sheet policy has been very important in some central banks. And, there's there's still remains questions about how to manage it and especially how to respond to liquidity crises with the ample reserves framework, with a big balance sheet that the fed has.
Let's go straight into that balance sheet policy as well. It is something which I think is going to become more and more prevalent as we do. Again, we talk about fiscal dominance being a potential issue as well, how the balance sheet is managed, how that is used, to offset concerns about the fiscal dominance side of things. Just tell us what your biggest concerns are about the framework of that balance sheet.
I think the biggest concern is actually less about the fiscal side, which really is, directly about interest rates. Whereas the, the balance sheet side is thinking about longer term interest rates. But the concern there is what happens in, say, a March 2023 situation where there's instability in liquidity in the bank, liquidity in the banking system.
When the regional banking crisis.
Exactly. And how can the fed respond in a situation like that? Or in 2019 when the balance sheet is very large, but you're having specific liquidity issues at individual financial institutions.
Do you not fear that the balance sheet, tool is going to become more and more prevalent, though? I mean, you talked about the control of the longer end. It's the longer end where everybody has been talking in this room and beyond and everywhere in Davos for a long time, most recently when we're looking at the current situation.
Yeah, it's already quite prevalent. You know, at the balance sheet grew from 5% of GDP in the US in 2005 to currently over 20% of GDP. So I think that the concern is it how it can shrink and if it can shrink, given the banking and financial institution regulation that we have.
I may get on the, the governor of the central Bank of Israel and is in his second term now, and he's also the most, incredibly behaved panelist as well, because he's the only one who read the questions. Which well, and realize there were five questions here as well. And I can also tell you and again, it was probably Chatham House, but I can also tell you that the conversation in the green room just before we came on was, yeah, we're looking to potentially grow some in the region of 5%, of which at least one central bank governor here is like, wow, that's pretty good. We wouldn't mind a bit of that. No names. Joakim. Yeah. Just tell us about the specific case of Israel. And do you have the tools available?
I guess more broadly, I would say interest rate to me, interest rate policy sets monetary stance. Liquidity tools are there to repair market functioning and monetary transmission when stress impairs it and targeted support, subsidies fiscal. That's should go on the fiscal side in in you know, it's exactly the point where you move from liquidity issues versus solvency. The solvency. The liquidity is is on the banking side, the solvency gets on the fiscal side. And I think when you talk about the balance sheet and some of these issues regarding balance sheets and crisis management, it's important to have in mind, capped quantities or timely, operations. So the lines between quasi fiscal and monetary don't get blurred or don't get blurred or blurred as minimal minimal as possible. So I think these are very, very important. For example, what the Bank of England did in the in the case of the gilts, it was two weeks and and a known quantity. In the beginning of the war in Israel, we announced we're going to sell up to $30 billion of reserves to help the functionality of the FX markets. These things, once they are, boxed, they I think prevent, blurring the lines between fiscal and monetary. So I think, the tools are there. There's obviously been a lot of, volatility and a lot of events, both in the world and in Israel from Covid, Ukraine, Russia, inflation, now the war in Israel. And you have to craft the right tools, for each event. But regular monetary policy should be primarily targeted at, making sure that, you set economic stability through price stability and the liquidity issues that sometimes or crisis management that appears with some of these events have to be dealt with very specific tools, with the primary focus that they are. It's communicated. That's part of the issue, that they are very targeted and you don't blur the lines.
I'll come to Martin in a few moments time, but you've obviously started up a conversation here between what what Janice was saying and capped quantities. For me as a former market practitioner. Sorry, I'm not ignoring you lot over here as well, but I will be naturally be turning there. But, but, but capped quantities give the market an opportunity to take on the central bank, don't they?
Again, you have to, you have to know which tool to apply when. All right. So in, we said up to 30. In our case, we said up to 30 billion. And we thought that was enough, to allow the markets to function, whereas the alternative, let's say, would have said, I'm defending a particular exchange rate. That's when you get a lot closer to market speculation. So in that context, that was a much better tool than trying to defend a particular exchange.
For sure. And I appreciate defending a particular level. Is a is a is a green light for the market to take you on? Of course, which is why a central bank to your left creates a degree of opacity. When when looking at perhaps interventions in the market which which may or may not happen. But but but not defending a level. I appreciate that as well. But giving a capped quantity again, the market knows it can go up against that much and then can just try and push further, which is going to force you into further action again down the line, isn't it?
There's look, whenever you are in a crisis situation, there are risks. There's uncertainty. What what I can say we announced we're going to do up to 30 billion. We ended up using only 8.2 billion.
You gave the intention.
And people understood and people knew. We have ample reserves. Obviously we didn't tell the markets when and if and how we we operate in the market, but that was enough. Important signal at that huge peak of uncertainty to give confidence to not only the market but to the Israeli bond and stock market. And that was very, very important. We are very transparent. At the end of every month we tell the market what is our reserve position. Once they saw that we only used eight, they were very confident. And the exchange rate. just one more question.
Because I think we'd all benefit from just, a recap of those extraordinary events that you had to deal with as a central bank governor of, of Israel when those devastating attacks happened, in Gaza or in Israel and in Gaza thereafter as well. Just, just did you feel that you had every tool available? Did you have to work more with the government to, to stabilize things? Just just tell me how you went about it.
So I want to add one more point. And that is not only communication, it's also consistency with monetary policy. So we use this tool in the FX market at the same time when the 7th of October happened, we had an interest rate decision two weeks after the whole country said the governor needs to lower interest rate. We said no, that is inconsistent with selling reserves. And we're and with higher risk premia. And we had to sort of educate the market. That's not going to happen. So consistency when you are in a crisis and you are using unconventional tools, consistency with the remaining monetary policy tools is very important. So that's one point. The second point about fiscal. Obviously there were a lot of fiscal plans it took it took more time for them to to be implemented. The government did. Some of them. We are we also serve as a role of the economic advisor to the government. And I'm glad to say the government did listen to a lot of our commendation in those times of very high peak uncertainty, where the markets were looking at Israel, what is going to happen to debt? And they did do difficult fiscal consolidation, both in the 24 budget and the 25 budget. And I think that was important. Of course, the other beyond the other geopolitical developments to help maintain market confidence in Israel.
Amir, thank you very much indeed for that. And it's nice to know at least one government out there listens to the central bankers when it comes to their fiscal responsibilities. Martin Schlegel, of course, is the chairman of the governing board of the Swiss National Bank as well. Martin, you know that you're in a unique position as well, because when there are crises happening around the world, whether they are in Europe, whether they're in the United States, whether they're in Israel, people turn to Switzerland for their safe haven. It is a bastion of stability, that creates different problems for you and the SNB.
So first, when I read the title of this, of this panel, Central Banking Beyond the Mandate, I had to smile because it was almost like a provocation, because central banking is not beyond the mandate. So what we do, we act within the mandate. And of course, we must not act beyond our mandate. What we also think, and what we also have at the Swiss National Bank, is a narrow mandate and very clear mandate, which is price stability and taking due respect of the of the economy. It has been mentioned many times. So we live in very uncertain times. That's very clear. But there's certainly no rethink of of central banking needed. Instead, central banks need to focus on their on their core mandate, which is, as I have said, is is price stability. Because this price stability, this is the contribution of the central bank can make to prosperity and growth. In in a country, what's also very important is central bank independence, because for a central bank it's much easier or it's almost a precondition to reach this price stability. Is this independence? And of course, as we all know, this independence comes with accountability. And also central banks have to explain what they do and how they do things. So you ask about the tools. And also there we think we have the tools. We have we have the interest rates. And we have also as Amir, we have also effects interventions. You have mentioned whenever there's a crisis in the world, the Swiss franc is a safe haven and tends to appreciate. And of course this makes monetary policy for us not easier. It makes it more difficult because the exchange rate is also very important for for inflation, which means if you have there's a crisis, we have an appreciation. And then we also have a lower, lower inflation. So it makes it more difficult. But I'm really convinced that we have the tools.
Before Joachim comes in on this one as well. You, are Switzerland, this magnificent country that's hosting us today, has been in the spotlight with the United States, of course, and it had extraordinary tariffs put upon it as well. But back in September, an agreement was reached whereby, you agreed not to manipulate the currency in a statement was recognizing that market interventions are a valid tool for addressing currency volatility or disorderly moves in FX. I struggle, and I want you to clarify for me the difference between manipulating the currency as a US administration might see it and valid interventions in order to keep down the value of the Swiss franc in days like today, where you are surging against the greenback in the last couple of days and you are reaching four week highs versus the euro, but I think it's specifically I'm not worried about your reaction to the euro swissy, but I am more concerned about the administration's reaction.
So first of all, this was not an agreement. It was a joint statement, which is a big difference because we cannot and will not make agreements with others about monetary policy because we are independent. And what's in this joint statement is basically it confirms what we have done for years. So when we intervene in the FX market, it's because of the monetary policies, because inflation was too low. Then we had to dampen the appreciation of the Swiss franc. But we also had episodes where inflation was too high. And then we we sold foreign currency and bought back the Swiss franc. So when we intervene in the FX market, it's always because of monetary policy. It's not to give Swiss exporters an unfair advantage or to prevent adjustments of the current account. This is this has to be very clear monetary policy, nothing else.
Let me just make the point that the latest Federal Statistics Office data showed below forecast imports below forecasts, prices 1.8% lower year on year as well, with the Swiss surging in recent days, is this a moment where the Swiss National Bank needs to intervene in order to maintain that price stability?
Well, we never comment on interventions in real time.
You appreciate everybody. I had to try.
Yeah.
And Marty knew it was coming. Please, sir.
But of course it's a very difficult situation for for Swiss exporters. They have to they I mean, for them almost every day they have to compete in the international markets and with the strong currency. This is not this is not easy. And I have really great respect for all these companies that compete successfully in the international markets.
Yeah. If I didn't get anywhere on intervention, I won't get anywhere on zero or negative interest rate policy. So I'll just let your Kim come in straight away on this one.
Yes. So first of all, what I learned since I'm a central banker, make no comment on on exchange rates. This is not a good not a good idea. But what I would like to comment is on on fiscal, because the euro system here is in a unique situation. We are not a fiscal union, we are just a monetary union. So we have.
Is that the problem?
Well, it's not a problem, but from time to time it could be challenging.
I can't help thinking when I read letter and I read Draghi and the latter providing a few bits of support for the market over the years, I can't help thinking it is part of the problem.
I think the challenge is we are 21 member states, so there's a quite a heterogeneity between the member states. So what I would like to address is the following that at the end it is important that fiscal is playing an important role, but shouldn't contradict what we do on the monetary policy side. And so we have rules within the European Union. We have the Stability and Growth Pact. And yes, I said it that these are extraordinary times, but this shouldn't be used as a kind of an excuse when it comes to fiscal at the end. The point is coming where fiscal consolidation is of utmost importance.
Joachim, you just said you have rules. You have the Stability and Growth pact. I'm pretty sure when I look at some of those rules, they are broken left, right and center by countries across Europe and by the eurozone as well. If the rules are broken and there is no punishment, how good are the rules?
So reading so reading in here, in between the lines in your question is that you don't believe in the rules that we are.
No, no, I believe in the rules. I don't believe in adherence to the rules.
Well, I believe so here at the end, from a monetary policy point of view, I think I have the strong conviction that these rules has to be fulfilled. And we central bankers within the euro system, we are asking for fulfilling these rules. And this is the responsibility that I see on the political side, and that they concluded on all these rules. So at the end, they do have to fulfill all these rules.
But, but, but whether it's in France, whether it's in Israel, you're advising the government, 3.9%. You said it's too high a deficit in the United States, Janice. 6% is too high a deficit. The president of France is struggling to get a government that can actually get through a budget, which will be cutting those as well. I don't see how that is. It's going to solve itself positively.
So what I definitely will not do is to comment on one or the other countries in Europe. But what I think is important here is the direction of where, let me say the budgets are going and what I see all over Europe that all the that all the country heads, they know their responsibility and know what they have to do at the end. So we have to convince financial markets on a daily basis, of course. And there is a misunderstanding and we learned a lot, let me say, and we learned it in a hard way over the last 15 years, how important it is to deliver at the end, on stable budgets and fiscal is so important in that context that I see that every country within the euro system, they know what they have to do. And I promise you at the end we will deliver on this.
I hope so, Janice. It's a very good point to bring in, where we've been talking about fiscal positions worsening. The concern that you have about fiscal dominance.
Yes. I mean, as Amir was speaking, he wanted to make a clear distinction between movements or policy interventions that are monetary and those that are for liquidity and then separate that distinctly from fiscal policy interventions. And so I'll refer to the survey that was circulated here from the chief economist saying that.
We've got a slide on if actually if they want to get it up.
If they can put it up. Roughly two thirds of the chief economists thought that the most likely intervention to bring down, not budget deficits, but the level of debt was inflation, sustained inflation. And it's, you know, it's one of many things that can be done outside of the, you know, the hard work. And so it has this appeal that, well, that'll that's an easier approach. But, you know, as, as we've seen, inflation is not appealing, in public because that's how fiscal dominance works. Right? It is in the short run, you try to push down interest rates in order to make government borrowing less expensive. But in the long run, the way the mechanism to bring down the debt is higher inflation, it reduces the real value of the debt. And so first, in inflation, we have found to be enormously unpopular just on its own. And then secondly, different countries structure their debt in different ways. And that has consequences for how effective, the reduction in the, in the real debt. This this mechanism can be because imagine a country where all of the debt is very short run, where it's all indexed or it's all floating rate. Well, then inflation doesn't do anything to bring down the debt. Everything just rolls over at a higher rate. Right? So the the idea people have in mind with this mechanism is that there's a lot of long run nominal debt, which some countries have relatively more Great Britain. The average maturity of their debt is 14 years. In the US.
It's under seven years, isn't it?
It's, under six years, 70 months. And so there's much more. Short term debt is lengthened slightly. But roughly 10% of the debt is floaters or tips indexed. Another 20% is under a year. And so, you know, you need even if you have inflation at a at a high rate, it doesn't move the real value of the debt very much, because there's so much short term debt that would need to be rolled over.
Does anyone.
I want to say something.
It's not. Not only do I not believe that there is long run trade off in this thing, I think even in the short run, because monetary policy and central banks behavior, which is ultimately about, you know, price stability, which I agree, it brings about prosperity. It's the pillar for for economic, stability and ultimate growth. If you lose credibility, that trade off doesn't exist even in the short run, because the curve just becomes steeper. And, so I'm not, you know, so even in the short run, you, may not even gain that, that trade off, but you, you know, you are risking surely losing it, for the long run. And then the pain in undoing, retreating back once you lose credibility is going to be a lot more painful in terms of fighting inflation. Once that credibility is.
Gone, I'll just say, ladies and gentlemen, if you want to get involved, can you give me an idea if you're actually going to interest in asking a question? Because we've got about 14 minutes left and I just want to carry on this conversation. If you do, just let me know. Francois will come in. I'll bring you in in a few moments time, because, you are you should be on this panel as well. Actually. Should be more. It should be me sitting down there. And you up here. Francois. Okay. So that's that's absolutely the key point, Amir as well. And I'll start off with Martin and I'll work my way down. There is a risk, given what we are seeing, especially in the United States at the moment. And I'm sure all of you were parties to signatories to supporting Jay Powell as well. Are you concerned about that trust, that credibility actually becoming a very big concern for the world's most important economy still and for the Federal Reserve? Martin.
So, I mean, trust and credibility for central Bank is absolutely crucial. And the only way to to to gain this trust is by delivering on the mandate, which is price stability. And this is something that is difficult to earn. You have to earn it over years and build up this credibility. And unfortunately it's also very easy, easy to lose. So central banks really have to take care to keep this credibility, deliver on their mandate so they, they can really, lay the basis for, for prosperity and growth in an economy.
Do you fear that when Jay Powell, if Jay Powell is there's a whole sequence of events that could happen? We all know that in May, when Jay Powell is replaced as the chair of the Federal Reserve, do you feel that is going to be problematic for credibility and trust? At the Federal Reserve?
Well, I cannot comment on on the Federal Reserve. Course.
Martin, did you sign that, central bank, document that was supporting.
I signed this document because central bank independence.
You do have those concerns.
Central bank independence is a very, very important concept just to enable central banks to deliver on their mandate. Central bank independence is not the aim. It's or means it's itself. It's really it's it's something that you need to have to deliver on the mandate.
Yeah. I'm going to go to Amir. Joakim, get yourself ready. Amir. And then Jan, then you.
I think.
You know, safeguarding central bank independence is not just a legal issue because I said it's it's kind of the pillar of, the pillar of economic stability through price stability. I think there are several things that you want to think about. One is, was talked about accountability and building trust through communication. That includes, you know, talking to the public, talking to, explaining your decision that they're, you know, they're basically basically, professional and they're analytical about what you do. The second one is decentralized decision making. So it's not just one person. That's why we have monetary policy committee. It's not one, one person. And the third is institutional insulation. And you would like the governance to be one where those who are elected there are not synchronized with the political cycle.
Yeah. John.
So the fed has many of those sort of institutions and the historical background that Amir refers to, to try to insulate it from political intervention. But with the dual mandate, there's always a conversation, and that's where having a credible and trusted leader is incredibly important, because there's always, even within the fed, a discussion, especially now, labor markets are a little weaker. Inflation is a little above the.
Target mandate of maximum employment. Yeah.
Yes. And so even internally there's a discussion that has to be communicated very carefully and, and with clarity that the fed is committed to both parts of the mandate. And as they communicated in the, in the new framework that when they're in conflict. So when you know, you're worried about stagflation, for example, that the fed will consider carefully the balance of the two. So credibility and trust is incredibly is especially important then because there's not a rule. Right. And but I think Jay has had the trust the respect of his colleagues of people within the fed and outside the fed and that that has come through.
Before it comes. quickly and then bring in Francois as well. I just I used to be a market participant. I felt if I traded bond options for many years, and I've just been a hack for 25 years, so I'm a layman, but but but why isn't Scott Bessent explaining to the president? I'm sure we've all got the point that actually, if you erode the trust in your central bank and you continue these assaults on Lisa Cook and Jay Powell and others, that actually the power of the central bank to control the longer end of the curve is diminished. We just talked about this. This is kind of what you're saying as well. Why aren't these very smart ladies and gentlemen in the administration and on Wall Street who have great influence, why aren't they holding greater sway and these assaults continue? It's a very basic question that I have. Jan, I'm asking you.
Oh, I thought you were asking.
I'll ask you, but I just kind of like.
Well, I think the markets have communicated at times around Liberation Day. There was a strong reaction from the market. And and so I think there is that communication. Individuals certainly communicate. But for, for it to be heard is, is another step.
Okay.
I have definitely no idea what the rationale behind this.
And genuinely you're looking at it.
And, and I never thought that I have to discuss in my career that the independence of the fed is in danger. And this is a very dangerous discussion at all. And I do have to give the US administration this reminder. It was the US that gave the Germans an independent central bank in 1948, and that was the starting point that Germany could grow over the past decades. And now we have to discuss the independence of, of of of the fed. This is well, Jay Powell is an excellent central banker. He has a tremendous good track record over the past years. So and, we should be very, very cautious about the independence of central banks. This is the DNA of good monetary policy.
I want to get another voice on now, if we could. I don't know if you get a microphone for Francois Villeroy de Galhau, who, I've had the pleasure of speaking to you many times over the years, and he's a terrific panelist, so he's going to be our panelist right now.
Just to say, I obviously agree with what you just said about Independence. And Chair Powell. I agree with what my friends and colleagues and Professor Eberle said. The way we act, this means we have the tools to act within our mandate. Bottom line. Can I raise a somewhat different question? And Joachim, you will not be surprised. Colleagues, not. Also, it's not about the way we act. It's about the way we speak and the fields we speak about. Because for me, the question of beyond the mandate could come there. Should we speak about fiscal policy, about structural reforms and Draghi reports in Europe, and why not international cooperation and the rule of law? And here there are very different traditions across the Atlantic. For example, the fed never speaks beyond its core mandate. In Europe we speak much more. We took the initiative with Joachim to call for structural reforms and the implementation of the Draghi report in Europe, my personal view, but I would be interested to have the panelists view, is that in such extraordinary times, we should use our independence and our expertise at least to bring technical lights on this debate. And we must accept that we are not the deciders because it's beyond our mandate. We are not politicized, but we bring our expertise. But again, this is my personal view. And this is, for me, a still more delicate question.
Francois. Thank you. We'll come to you in a few moments time. Amir, pick up on that.
I guess I have no choice because it's part of the.
Well, you have a mandate in yourself, don't you?
The mandate itself calls us as the economic advisor to the government. So literally on budget issues, we, the Treasury Finance Ministry has to talk to us. And I actually have to speak on budget issues. But I would say, it's better always to try to contain yourself wearing the economic hat, for example, I was I spoke when the judicial issues changes were proposed in Israel. I said from an economic there's a long economic literature that speaks about the importance of the independence and strength of institution and how that is positively correlated with growth. And we, I actually spoke about it, obviously, and Nobel was given to about that recently. So, so that's a situation where, we, I kind of spoke about, and that's obviously related to as central bank are an important institution. So they're strengthening independence is important. So that's an example where I spoke about the issue from. But from the vantage point of an economics.
Martin, I sense you'd feel more uncomfortable about that.
So should we speak about fiscal policy? I think Switzerland is a little bit a special case because, public debt is relatively low. And we have this, this fiscal rule, we call it the debt brake rule. It's in place since the 2001. And, it was really very important to keep that low, the debt level low in Switzerland on a, on a, on a federal level. So generally, this is what I say about the fiscal situation because it's there's no, no reason for me to warn about the fiscal, the fiscal developments in Switzerland at this point.
Okay. Can you come on this? And then we've got I'm going to get this gentleman to get a question after you wait.
Short answer. I have a clear view here. And I couldn't agree more with Francois. As always, I think I believe we do have to speak about these things. I once said last year in a speech that in my classification, this is modern central banking because there are so many spillovers from fiscal to our mandate. And the world changed dramatically over the past couple of years. So I believe also central banks have to change. I know that this is a thin line between mandate, and maybe some people are saying this is outside of the mandate, but I have the clear view here that there are so many spillovers back to our mandate that we have to speak about all these things. This is our responsibility.
And just before Jan comes in and then we get this gentleman's final question as well. I remember ten, 12 years ago, many of the speeches from Mr. Draghi specifically calling on countries to not only sort their fiscal house out, but sort the restructuring out things that he's obviously since doubled down on as well. And for a long time, Mario Draghi led the way saying you have to restructure. We're giving you this. Draghi put you have to restructure. And countries across Europe by and large ignored him. Jan.
Just a quick note that, Jay Powell in testimony before the Senate Banking Committee, did mention fiscal issues and his concern. This was some years ago. And it's been an important issue. And he mentioned exactly the interaction that you do. And then, of course, his statement a week ago Sunday, was very much about the mandate, but certainly not his normal way of communicating.
Could you make it very quick question, because I know that I'm up against Simon. I normally only go over by about three minutes.
It's not a question. It's just a small statement.
Sure.
So I agree with whatever my colleagues said.
And your name,
Sir Martin Goldstein. I'm the governor of the central Bank of Armenia.
Thank you sir.
The question is that, after adopting inflation targeting, especially the flexible inflation targeting, less and less countries face high inflations because frameworks are in place. And then those countries which face high inflation, those are because of the fiscal problems that the governments accumulate. Can central banks solve those problems? Working with governments? Sometimes. Not often. That is not happen usually. But we do have a very strong institution on our side. Those are the markets. And then if we don't have responsible governments, then the markets will punish those governments and then society will carry the costs. And then central bank could have a dialogue.
Yeah, I think that's an incredible point. And that is the point where Mr. Trump has once been reined in, as you said, April last year. Does anyone want to pick up on that as a final point?
Well, I think we will see what happens tomorrow and then we learn more.
Are you nervous about tomorrow's speech?
Well, a little.
Bit, yeah. So we'll start at Martin and we'll work our way down. Joakim, final question as well. Do you have all the tools you need? Would you like other tools in order to carry on operating and creating cohesive and reassuring monetary policy for, for Switzerland and beyond?
We have all the tools that we need. It's interest rates. It's the exchange rate. And this is enough for us to safeguard this price stability.
One more time. Do you think you're going to be using any of those tools in the next 24 hours? I'm taking that as a no comment. Aaron Amir.
I think we have ample tools. One always, at least think about how to expand, sharpen your toolbox. But I think we've proven over the last couple of years that we know how to manage crises and also, deliver price stability in a pretty volatile environment.
Is the US about to lose some of its key tools? Independence?
I don't think so.
You're optimistic?
I'm. I'm optimistic. But it's not going to be easy.
Yeah. And Johan.
Final word. Well, if something.
Is necessary. The euro system is prepared.
I'd like to thank the contribution from the governor of the central Bank of Romania.
Was Armenia.
Armenia? I beg your pardon, sir. And from Francois Delgado as well. Joachim. There you go. Amir. Yaron. Martin Schlegel. Thank you. You appreciate it? I had to try twice. And Janice Eberly, lovely to see you all. Thank you very much indeed for your time.
Thank you.