What one interest rate cannot do: four central bankers draw the boundary of their own tool

Serguey Asael Shinder13 October 2026, 06:542 min read

Four speeches by central bankers on three continents, all published in the past week, cover very different subjects: US inflation, Canadian housing, the post-Bretton Woods order and climate risk in Africa. What links them is that each speaker spends as much time on what the interest rate cannot do as on what it should.

Hammack (Cleveland Fed): the rate answers inflation, not every shock. Beth Hammack argues for a restrictive stance in smaller, quicker steps because inflation pressures are broad: tariff waves, energy, AI-related demand. Her distinction is between shocks: she can look through one supply shock, but "a much harder time" with shocks that arrive one after another. And she separates a reaction function — how policy is likely to respond — from forward guidance, a commitment. The rate is a response to conditions, not a promise.

Rogers (Bank of Canada): one rate cannot target one market. Carolyn Rogers explains why the Bank's framework review did not make house prices a target: the Bank sets one rate for the whole economy, and rates cannot build homes, rezone land or speed up permits. Even the inflation measure has no simple fix for shelter costs. Her conclusion is that housing must remain an input to rate decisions, but that targeting it would ask monetary policy to do more than it reasonably can.

Tshazibana (SARB): central banks are not environmental policymakers. Fundi Tshazibana treats climate and nature risk as a central-bank concern only where it reaches price and financial stability — floods that cut output and strain insurers, droughts that feed food inflation. The SARB stress-tests and supervises those channels, but does not use monetary policy or credit allocation to pursue climate goals at the cost of inflation or credibility.

Frait (CNB): do not concede the boundary in advance. Jan Frait comes at it from the other side. He finds the consensus that high public debt will bring fiscal dominance unconvincing, and warns that conceding in advance that the commitment to sound money might waver would be "a put option on the monetary financing" of over-indebted sectors.

The common line. Each speaker separates the mandate — price stability, with financial stability alongside — from problems that touch it but are not solved by it: housing supply, climate adaptation, fiscal choices, shocks still to come. That is not modesty. A central bank that is clear about what its tool cannot do is harder to pull into doing it, and its reaction to what it can do becomes easier to read.

What to watch. The line is tested when the pressures arrive together. Hammack's case is exactly that: tariffs, energy and AI demand at once. The more overlapping the shocks, the more the boundary each of them drew will be asked to hold.

Sources: Cleveland Fed, Hammack — https://www.clevelandfed.org/collections/speeches/2026/sp-20261012-trimming-the-sails-communicating-my-reaction-function ; Bank of Canada, Rogers (via BIS) — https://www.bis.org/speeches/20261007-canadas-housing-affordability-dilemma ; SARB, Tshazibana (via BIS) — https://www.bis.org/speeches/20261008-sustainable-finance-and-shifting-risk-landscape ; CNB, Frait (via BIS) — https://www.bis.org/speeches/20261007-czech-koruna-50-years-after-beginning-post-bretton-woods-system-and-czech-national-bank-100-years-after-establishment