As the quartet breaks up, Fed leadership flux looms
WASHINGTON: The leaders of the world’s top central banks who risked trillions of dollars and their reputations to rescue the global economy are now set to walk off stage at a time when the lingering effects of the crisis, evolving technology and a combustible political landscape will challenge their successors. The Federal Reserve, the Bank of Japan and the People’s Bank of China may all have new bosses in early 2018 and there will be a new head of the European Central Bank the following year.
The new leaders will have to deal with the hangover from the 2007-2009 crisis and its immediate aftermath as well as newly emerging risks. Some $10 trillion in assets bought by the Fed, the ECB and the BOJ to prop up their economies remains on the books and will have to be pared back. Stubbornly low global inflation and weak growth complicate the return to more conventional policies.
There are unfinished reforms in China and Europe, while the rise of nationalism could erode central bank independence. Further ahead, the spread of cryptocurrencies and other technologies threatens to weaken central bank control over the financial system.
“The bad news is that in a crisis people learn by doing,” said Vincent Reinhart, chief economist at investment firm Standish Mellon and a longtime official at the Federal Reserve. “Will
the next set of people have the set of experiences that allows them to do that? Will they have a test?”
The changing of the guard could veer in unpredictable directions. China’s president is considering a provincial official to succeed Zhou Xiaochuan, a veteran policymaker who has led the central bank since 2002 and whom analysts regard as a champion of reforms that could falter without his leadership.
In the United States, President Donald Trump will have the opportunity to infuse his “America First” sensibility at the Fed, an institution with an undeniable global role, when Chair Janet Yellen’s term ends in early February. BOJ Governor Haruhiko Kuroda’s shock-and-awe record monetary stimulus gets credited for helping Japan snap out of years of stagnation. He will see his term end next April with the economy expected to keep growing, but inflation still far from his target, fueling doubts about the overall effectiveness of his policy. — Reuters