Monetary Policy in Uncertain Times

In crisis times, the central bank is inevitably confronted with greater uncertainty and achieving its monetary policy objective becomes more complex. This paper posits that increased uncertainty should not prevent a central bank from taking informed decisions, but it does require a more cautious assessment and processing of information as well as adopting a broader view of the economy and a more preventive orientation towards emerging risks. Most importantly, it requires a central bank’s readiness to take informed decisions that correspond to its communicated reaction function and to thereby, act under uncertainty and deliver on its mandate.