Central banks will never admit that they are ensuring governments’ fiscal solvency

Central banks (we look at the cases of the Federal Reserve, the ECB and the Bank of Japan) still officially have an inflation target. We see that in reality, the highly expansionary monetary policies are not having any impact on core inflation, but are enabl ing governments to maintain fiscal solvency. But central banks will never admit that their objective is to ensure governments’ fiscal solvency. The reason is that central bank independence requires that there be no interaction between fiscal policy and monetary policy. Such interaction would require a coordination of monetary policy and fiscal policy.