Compared with the past two crisis-dominated gatherings, the atmosphere at this year’s central bankers’ meeting in Jackson Hole, Wyoming, was relaxed. Ben Bernanke, the Federal Reserve chairman, whom Barack Obama nominated for a second term on August 25th, found time to go hiking and horse-riding. The mood was one of quiet relief at the signs of economic recovery and not-so-quiet pride at central bankers’ role in saving global finance. But below the surface lurked concern and confusion. Many central bankers worried that the recovery would be feeble and fragile. Few have come to terms with how fundamentally the crisis has changed both their tasks and their toolkit.

For the past decade central banking has been dominated by what could be called the “Jackson Hole consensus”, since many of its elements were developed during the annual summer shindig organised by the Kansas City Fed. This consensus holds that central bankers’ prime task is to keep inflation low and stable. It favours an inflation target as a way to anchor people’s expectations of future policy, and puts a lot of weight on the transparency and predictability of central banks’ interest-rate decisions.

The consensus was not absolute. The Fed, for instance, has never adopted an explicit inflation target (though it has an implicit one). Some central bankers in Europe and Japan argued that monetary policy should “lean against” asset bubbles, whereas Fed officials thought bubbles were hard to spot, and that it was less costly to clean up by cutting rates after they burst. No one, however, focused much on central bankers’ responsibility for broader financial stability, or thought much about the financial plumbing through which changes in short-term interest rates affect the broader economy.

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