ECB’s Draghi urges better coordination between central banks
European Central Bank president Mario Draghi on Tuesday called for better policy coordination between the world's major central banks in order to meet the challenges of today's global economy.
“We would all clearly benefit from enhanced understanding among central banks on the relative paths of monetary policy,” Draghi told a special forum organised by the ECB in the secluded luxury resort of Sintra in Portugal.
“We may not need formal coordination of policies. But we can benefit from alignment of policies,” Draghi said.
“What I mean by alignment is a shared diagnosis of the root causes of the challenges that affect us all; and a shared commitment to found our domestic policies on that diagnosis.”
Speaking to leading economists, academics, financial market players and central bankers from across the globe at the three-day think-fest, Draghi said that “we have seen … how divergent monetary policies among major central banks can create uncertainty.”
Monetary policy “has inevitably created destabilising spillovers,” he continued, pointing to “large exchange rates fluctuations between major currencies, and the pressures some emerging economies have experienced from capital flows.”
He acknowledged that “central banks have national mandates, not global ones, and are accountable to their domestic parliament. This does not mean, however, that we cannot achieve a better global solution than we have today.”
Draghi suggested that commmunication “over our reaction functions and policy frameworks” could be improved.
“We have to think not just about whether our domestic monetary policies are appropriate, but whether they are properly aligned across jurisdictions,” he said.