WASHINGTON Central banks do not operate in a vacuum and must be mindful of the effects of their policies on other countries, a panel of top economists said on Tuesday.
In a Brookings Institution report that hinted at criticism of the Federal Reserve, the experts argued that spillover effects are important, and called for the formation of an international group to monitor them.
They also urged central banks, including the Fed and other rich-country institutions to specifically acknowledge financial stability as one of their mandated goals.
"Central banks should go beyond their traditional emphasis on low inflation to adopt an explicit goal of financial stability," the report said.
Among the 16 well-known economists and financial experts to sign the report were Barry Eichengreen from the University of California, Berkeley, Mohamed El-Erian of the bond fund Pimco and Kenneth Rogoff from Harvard.
"We call for the creation of an International Monetary Policy Committee composed of representatives of major central banks that will report regularly to world leaders on the aggregate consequences of individual central bank policies."
The findings come as the Federal Reserve, faced with a weakening U.S. economy, ponders another round of unconventional monetary stimulus. Many analysts believe the Fed will take some type of step to support low long-term rates at its September 20-21 meeting.
When the Fed implemented its second round of bond-buying, it came under harsh criticism from emerging economies for pushing up their exchange rates with ultra-low rates in the United States.
"Central banks are more likely to safeguard their independence and credibility by acknowledging and explicitly addressing the tensions between inflation targeting and competing objectives than by denying such linkages and proceeding with business as usual," the report said.
"Central banks should make clear that monetary policy is only one part of the policy response and cannot be effective unless other policies -- fiscal and structural policies, financial sector regulation -- work in tandem."
(Reporting by Pedro Nicolaci da Costa; Editing by Andrew Hay)