But while [this] view is theoretically rigorous, reality is not” (Businessworld, September 17, 2007) Although some central banks, such as the US Federal Reserve, have an explicit mandate to also promote growth, a good deal of thinking in recent times tends to argue that inflation control by itself would promote growth and that central banks would be better off to concentrate on this objective alone.
It is instructive to examine what central banks have done in the current context. The responses of the central banks to the recent events in financial markets have shown that concerns for financial stability can assume overriding importance, irrespective of the legislative mandate handed down to central banks as part of ongoing reforms.