In a lecture delivered at a Bank of Japan Institute for Monetary and Economic Studies conference last week, Agustín Carstens, General Manager of the Bank for International Settlements (BIS), argued that public trust is a critical enabler of success when deploying macroeconomic, regulatory, and supervisory policy.
"Without trust, public policies cannot succeed," he warned, outlining a "virtuous circle" in which effective policies build credibility, enabling future reforms. In contrast, he argued, failure to maintain coherence across fiscal, monetary, and financial policy quickly erodes legitimacy and stability.
Carstens drew on his four decades of experience as a policymaker to highlight how trust shapes public expectations and market reactions. He emphasized that consistency, clarity, and adaptability are essential. “Policies must adapt… However, the public has a right to expect a degree of continuity and transparency,” he noted.
Carstens reaffirmed core principles of central banking, but added a pointed reminder: frameworks work only if the public believes in them. With inflation risks lingering, sovereign debt rising, and market scrutiny intensifying, Carstens called for renewed discipline and coordination. However, he emphasized that policymakers cannot handle these challenges alone. "Part of preserving trust," he argued, "is to know the limits of what policies can deliver."
"Expecting policymakers to deploy extraordinary macroeconomic policies to respond to every challenge is a sure way to erode the public trust," Carstens concluded. "Building resilient and robust economies and financial systems is the best way to ensure that policies remain effective, so that they can be deployed when they are needed the most."
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