The key policy question central bankers face is: if so much monetary easing failed to lift prices, what will?
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Top central bankers and finance ministers will gather later this week for the annual Jackson Hole Symposium, organized by the Federal Reserve Bank of Kansas City. The theme is apt: “Fostering a Dynamic Global Economy”. This month marks the 10th anniversary of the beginning of the financial crisis, which intensified after the collapse of Lehman Brothers in September 2008 and pushed the global financial system to the brink.
A large part of the developed world is still dependent on unconventional monetary policy. Some of the systemically important central banks will, at some point, have to deal with the mammoth challenge of rightsizing their bloated balance sheets. While policymakers can draw comfort from the fact that the global economy is showing signs of synchronized expansion, they would still be worried about prices, as inflation continues to remain subdued. The key policy question, therefore, is: if so much monetary easing failed to lift prices, what will? The answer to this question will be crucial to nurturing a dynamic global economy.