societal responsibility and central bank independence keynote speech by isabel schnabel, member of the executive board of the ecb, at the “ viii. new paradigm workshop ”, organised by the forum new economy frankfurt am main, 27 may 2021 central banking in times of shifting societal concerns the best contribution that central banks can make to economic prosperity is to maintain stable prices : this was the broad consensus among academic scholars and policymakers emerging in the late 1970s when inflation in many advanced economies had surged to double - digit levels, thereby eroding purchasing power and hitting the poorest in society the hardest ( chart 1 ). chart 1 consumer price inflation ( 1960 - 1990 ) ( year - on - year change, % ) source : imf. the delegation of the task of maintaining price stability to an independent and accountable institution with a clear mandate has proven successful in solving the underlying time inconsistency problem while upholding democratic principles. this underpins the large degree of political independence that most central banks enjoy, including the ecb, which consistently ranks as one of the most independent central banks in the world ( chart 2 ). 2 / 17 chart 2 measures of central bank independence ( index, 0 - 1 ) source : dall ’ orto mas et al. ( 2020 ), “ the case for central bank independence ”, occasional paper series, no 248, october. note : indices calculated by bodea and hicks ( 2015 ) and garriga ( 2016 ). index values in bodea and hicks ( 2015 ) refer to 2014 ( data for the ecb refers to 2010 ) ; index values in garriga ( 2016 ) refer to 2012. the values correspond to the unweighted indices of central bank independence. values closer to 1 indicate higher levels of independence. france, germany and italy are excluded from the sample given that the ecb is included. yet, many years of low and stable inflation have led to memories fading, particularly among young people, of just how bad a general and persistent rise in the price level can be for society at large. many young people have never experienced inflation. at the same time, it remains a mystery to many why too low inflation may be as much a concern to society as a period of too high inflation. younger generations typically have different concerns and anxieties than price stability : surveys show that they care about climate change and that they fear job uncertainty, having lived through years of crises and now facing the upheaval of the fourth

if the actions are as far - reaching and complex as they have been over the past decade. since the global financial crisis of 2008, a combination of adverse structural and cyclical factors jointly contributed to the rapid erosion of central banks ’ conventional policy space ( chart 5 ). chart 5 central bank policy rates ( % ) source : bis. note : the policy rate for the euro area refers to the main refinancing operation ( mro ). as a result, central banks were forced to expand the set of instruments used to achieve their mandates. in the euro area, there is broad agreement among experts that asset purchases, targeted longer - term refinancing operations, forward guidance and negative rates were necessary to shelter the economy from the otherwise devastating consequences that years of subdued demand would have meant for employment, wages and prices. but these measures, and their broader transmission channels, are hard to understand even for experts. they remain inaccessible for a large part of society, in spite of all the efforts of central banks to communicate on their policies. as andy haldane put it : “ … around 95 % of all the words central banks utter are inaccessible to around 95 % of the population. ” the sheer numbers involved in today ’ s central bank operations intimidate many people, and feed perceptions that central banks have become more powerful than ever, and potentially too powerful. the size of the ecb ’ s balance sheet, for example, has expanded rapidly in recent years ( chart 6 ). chart 6 evolution of ecb balance sheet ( € billion ) source : ecb, ecb calculations. latest observation : 25 may 2021. and if people do not understand what we do, they may not trust us that we are doing the right thing. data from the ecb ’ s consumer expectations survey corroborate this view. they confirm that a better understanding of the ecb ’ s tasks is positively correlated with trust in the institution ( chart 7 ). chart 7 ecb knowledge and trust in the ecb ( x - axis : index, 0 - 7 ; y - axis : index, 0 - 10 ) source : ecb consumer expectations survey. note : data as of may 2020. data takes country - level differences into account. with respect to ecb knowledge, respondents were asked to assess the correctness of seven statements about the objectives and responsibilities of the ecb. ecb knowledge is computed as the total number of correct responses out of seven statements. negative values and values