The financial crisis continues to wreak havoc across the financial markets and economies of the world, forcing central banks to juggle the potentially conflicting demands of sustaining liquidity, restoring financial stability and managing the ever increasing risks on their rapidly expanding balance sheets. Even when the crisis eventually subsides, the role of central banks and the financial and political environment in which they operate will never be the same again.
Anxious financial markets are not only looking to politicians but also to central banks to take the lead in tackling a morphing global crisis, yet the range of conventional options for central bankers is limited.