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View all search resultsMission impossible for BI
A plan to task Bank Indonesia with ensuring employment through economic growth comes at a bad time for the central bank.
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A man walks past Bank Indonesia headquarters in Jakarta on Sept. 2, 2024. (Reuters/Ajeng Dinar Ulfiana)
A
plan to task Bank Indonesia (BI) with ensuring employment through economic growth comes at a bad time for the central bank, which is struggling to defend the rupiah against strong selling pressure.
A dual mandate is the exception rather than the norm in monetary policy.
The United States Federal Reserve (Fed) is required by Congress to work simultaneously toward maximum employment and stable prices.
The Reserve Bank of New Zealand (RBNZ) was given a second policy objective in 2018 to support “maximum sustainable employment”, but that mandate was removed again in 2023, letting the RBNZ focus fully on its “economic objective of achieving and maintaining stability in the general level of prices”.
It should give us pause that almost no central bank has followed the Fed with the dual mandate and that the RBNZ swiftly abandoned such a policy.
Our House of Representatives might want to study carefully the experience of the RBNZ, which has drawn the following conclusion: “While in the short run monetary policy can also be used to support other important outcomes, like economic output and employment, it is widely accepted that it cannot reliably do so in the long run – except, for example, through the benefits of price and macroeconomic stability.”
What makes us think that what did not work in New Zealand should work better here?
