Global Finance’s annual evaluation of the work of the world’s central bankers found some stellar performances, and some dismal ones. The toughest challenge for many: propping up falling prices.

Author: Anita Hawser, Gordon Platt, Santiago Fittipaldi

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Carlos Fernández Valdovinos



Julio Velarde Flores



Miroslav Singer



Mario Draghi



Raghuram Rajan



Zeti Akhtar Aziz



Amando Tetangco Jr.



Perng Fai-nan



Karnit Flug

Generally speaking, monetary policy does not come in a one-size-fits-all model. Since the global financial crisis, however, central bankers in many countries have adopted a similar tack. They’ve stopped acting as inflation fighters. Instead, they’ve embraced unconventional policies to stave off deflation, which remains a persistent problem. And they’ve had to do this while wrestling with volatile swings in free-floating currency rates. Many countries, particularly those in emerging markets, have drifted toward flexible, but managed, exchange rate systems.

And while monetary policy is an inexact science, central bankers on the whole are getting better at their jobs. “Central banking as a profession has come a long way, striving to adapt itself to the challenges faced by economies over time,” says Stanley Fischer, vice chairman of the Federal Reserve and former governor of the Bank of Israel. “And both the practice and theory of central banking will continue to evolve.”

They’ll have to. Global markets are increasingly intertwined, which adds to the complexity of keeping economies on an even keel. The appreciation of the US dollar, for one, has kept central bankers in emerging markets on their toes. Cheaper exports are a good thing, pricier imports are not. And central bankers in developing countries have been holding their breath, anticipating what will happen when the US federal funds rate goes up.

The wild swings on global stock markets that commenced in late August put the Fed’s move on hold. But Fischer, speaking at a roundtable for African central bankers at the University of Oxford, noted that the eventual rise in the Fed’s overnight rate will likely trigger higher interest rates around the world. “The increase in global interest rates could cause investors to adjust their portfolios, triggering capital outflows from emerging market and developing economies,” he said.

That could well be the case in Asia. Many central banks in the region, including those of China and India, have cut interest rates this year and devalued their currencies to promote growth. Higher interest rates in emerging markets and developing nations will make those countries less attractive to asset managers. Fischer believes the US central bank is well aware of possible damage to other economies from its policy moves, however. “In an interconnected world,” he says, “fulfilling the Fed’s objectives requires that we pay close attention to how our own actions affect other countries, and how developments abroad, in turn, spill back into US economic conditions.”

Case in point: Many African nations were able to issue bonds in global markets in recent years—some for the first time ever. But higher interest rates could limit these countries’ ability to finance essential projects or fund budget deficits on favorable terms. The slump in commodities prices—and the surge in the US dollar—will make it more difficult. “The reduced ability of governments to finance their needs will likely increase the challenges faced by central banks in their efforts to assist the economic growth and development agendas of their national governments,” Fischer notes.

Typically, a central bank’s choice of monetary policy framework depends on the objectives it aims to achieve, on the challenges that an economy faces, and on the structure of the financial markets and the economy in which it operates, according to Fischer. In many developing countries, financial systems remain small and are not diversified. That hinders the ability of central banks to conduct open-market operations, he says. In these cases, changes in policy rates have a limited effect on the economy and other interest rates. Therefore, as developing countries seek to modernize their policy frameworks, Fischer explains, they must engage in a parallel effort to develop the market institutions needed to carry out monetary policy effectively.

Of course, every country faces a different economic situation. And every central bank has to take a wide range of factors into account when formulating policies aimed at remedying problems.

As our Central Banker Report Cards show, some central bankers are doing a better job than others at making the right moves. We assessed 74 governors on an A to F scale. Nine governors received an A. Three central bankers—all from Latin American countries—got a D. None of the 74 merited a failing grade.

Global Finance has published the report cards since 1994. The rating is based on, among other things, inflation control, economic growth, currency stability and interest-rate management, as well as the determination of central bankers to protect their independence in the face of political pressure.