The emergence of the international financial crisis in 2007 and its escalation in 2008 revealed the fragility of the world economy and the credit system as never before. It may come as a surprise that, despite its gravity, the economic crisis of recent years has not undermined the foundations of monetary policy. The principles of “modern central banking” formulated by Fischer remain unchallenged.
Indeed, it is astonishing that central banks have been so successful in achieving their primary objective of price stability and solid anchoring of inflation expectations amidst these highly extreme circumstances. This is probably in essence attributable to central bank independence and the confidence that this builds.