Should central banks target employment?
Yes – and a re-ordering of priorities is particularly needed in the eurozone and for the European Central Bank.
On 12 December, the chairman of the US Federal Reserve, Ben Bernanke announced that the Fed will keep interest rates at close to zero until the unemployment rate falls to 6.5%, provided that inflation expectations remain subdued. While the Fed’s governing statutes, unlike those of the European Central Bank (ECB), explicitly include a mandate to support employment, the announcement marked the first time that the Fed tied its interest-rate policy to a numerical employment target. It is a welcome breakthrough, and one that should be emulated by others – not least the ECB.