Broad consensus before and during the crisis and future challenges of central banks

The main objective of low and stable inflation with micro-prudential supervision of the banking sector was not enough to counteract and prevent building-up of the systemic risk. With the escalation of the crisis central banks introduced a set of standard measures for containment and mitigation of financial imbalances. Standard measures did not meet expectations, and the central banks were forced to activate measures to compensate for the dried up sources of liquidity. Central banks acted in an innovative fashion by creating new programmes. They provided large proportions of liquidity and favourable interest rates, with suitable collaterals. In addition, they increased their balances and bought large amounts of securities from public and private sectors. Their actions were aimed to quell financial troubles. After the crisis subsided, current practices of central banks were reviewed and also their future role. Pre-crisis widely accepted consensus is no longer viable and changes are necessary. In the future, they need to keep their main objective, price stability, and to expand their narrow mandate in order to establish financial stability and contribute to the achievement of the other macroeconomic goals.