The Evolving Role of the Federal Reserve

The financial crisis has made central banks use functions that had been largely ignored for decades. At the beginning of the 20^th century, central banking was about price stability and open-market activity. Since 2008, the functions of financial stability and of liquidity provider to illiquid financial institutions have been rediscovered. From now on, central banks will have to operate broader roles: regards on macroeconomic policy, implementation of macro-prudential policy and regulation of financial institutions. With these broader responsibilities, the environment in which central banks operate will also change becoming more political.