Not more than six years ago, it was simple and boring: in the conventional view it dealt with one main objective, – that is, keeping inflation under control, – and in a few cases with the additional objective of abating unemployment; the central bank was the main institution within the state with the mandate to achieve such objective(s); and it was also empowered with the instrument to achieve this, namely the capacity to set a short term reference interest rate.
The flexible inflation targeting regime seemed to work extremely well. Asset price considerations and financial stability tended to play a secondary role. But this ideal world changed substantially, and indeed abruptly, in 2008 with the financial crisis that erupted just a few blocks away from here. Advanced economies entered into a major and ongoing crisis.