Why central bankers' conventional tools are no longer working

Tweaking inflation targets is not an adequate response to the challenges facing major economies

The world's central bankers and the scholars who follow them are having their annual moment of reflection in Jackson Hole, Wyoming. But the theme of this year's meeting, "challenges for monetary policy", may encourage an insular - and dangerous - complacency.

Simply put, tweaking inflation targets, communications strategies, or even balance sheets is not an adequate response to the challenges now confronting the major economies. Rather, 10 years of below-target inflation throughout the developed world, with 30 more expected by the market, and the utter failure of the Bank of Japan's extensive efforts to raise inflation suggest that what was previously treated as axiomatic is in fact false: central banks cannot always set inflation rates through monetary policy.