FOR four years rich-world central banks have done their best to rejuvenate economies with conventional and unconventional monetary policy. Now, with short-term interest rates still stuck near zero and their balance-sheets stuffed with government bonds, the central banks of America, Britain and Japan are experimenting with a shift in approach: coupling monetary action with commitments designed to alter the public’s expectations of interest rates, inflation and the economy. The sense of change is reinforced by the prospect of new leaders at the Japanese and British central banks, and the increasing prominence of several doves at America’s.
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A more doveish stance would entail tolerating higher inflation, at least temporarily, in pursuit of higher output: a significant shift given the primacy central banks have long given to low inflation. Bond investors have begun to price in higher inflation (see chart). But just how far each central bank is prepared to go is still uncertain.


In Japan, Shinzo Abe, the prime minister, has used the term “regime change” to describe the Bank of Japan’s (BoJ’s) agreement to raise its inflation target to 2% from 1%, and pursue it with unlimited asset purchases. There are expectations for even more forceful action once Masaaki Shirakawa, the current governor, and his two deputies depart on March 19th. Under Mr Shirakawa the BoJ bought lots more assets, but critics said he undercut the positive impact by repeatedly saying they were not enough to end deflation and by restricting the maturity of bonds the bank bought.


Mr Abe is expected to nominate Mr Shirakawa’s successor by the end of February. The three front-runners, in ascending order of doveishness, are Toshiro Muto, Haruhiko Kuroda and Kazumasa Iwata. The first two are former finance-ministry officials; Mr Muto and Mr Iwata are former deputy BoJ governors. The latter may be Mr Abe’s favoured choice, although Mr Kuroda, head of the Asian Development Bank, is considered to have the most global experience. In a recent interview with The Economist, he said the bank must do “anything and everything” to hit its 2% target.


But putting deflation-fighters at the helm may not overcome the bank’s inherent conservatism. Minutes of the bank’s January policy-board meeting showed some members had misgivings about their ability to hit the 2% target. Masamichi Adachi of J.P. Morgan says the new leaders may fail to deliver the aggressive easing that foreign investors seem to expect.


Mark Carney, who will become governor of the Bank of England in July, has fuelled hints of a regime change of his own, saying that central banks should regularly review how they achieve their policy goals and that in exceptional circumstances there might be a case for temporarily targeting nominal GDP (ie, output unadjusted for inflation). But he has yet to endorse that as an alternative. At a parliamentary committee on February 7th, he indicated support for simply allowing inflation to stay above target for an extended period.


Adam Posen, a former member of the bank’s monetary-policy committee who now heads the Peterson Institute for International Economics, a think-tank, says Mr Carney’s background does not suggest a radical break. Both the Bank of England and the Bank of Canada, which Mr Carney now heads, target 2% inflation but allow temporary deviations in support of growth. Inflation has run above the BoE’s 2% target for most of the past eight years. At its last meeting on February 7th the bank’s monetary-policy committee said it may continue to do so for two more years, yet a third of its members, including Sir Mervyn King, the outgoing governor, voted for more quantitative easing, or QE.


Nonetheless, both Mr Carney and the Treasury are interested in re-examining the bank’s mandate. That could lead, if not to a nominal-GDP target, to an even more flexible interpretation of the inflation target that justifies keeping rates lower for longer.


The Federal Reserve has had a mandate since the 1970s to pursue both full employment and low inflation. In practice, inflation came first. But in a statement clarifying its long-term goals and strategy a year ago, it said that when there was a conflict between pursuing lower inflation and higher employment, it would balance the two, focusing on whichever was furthest from a satisfactory level. It later put that strategy into practice by promising unlimited QE until employment had “substantially” improved, then setting a 6.5% threshold for unemployment before it would consider raising interest rates.


Although Ben Bernanke, the chairman, has presided over this shift, its most outspoken champions are a handful of doveish officials—in particular Charlie Evans, president of the Chicago Fed, and Janet Yellen, the Fed’s vice-chairman. Her views draw particular attention as she is part of the Fed’s leadership, was responsible for producing the strategy statement, and is a front-runner to succeed Mr Bernanke should he retire next January.


In a 2012 speech Ms Yellen laid out a theoretical path to meeting the Fed’s dual goals that would allow inflation temporarily to drift above its 2% target (it is now 1.3%). Economists at Goldman Sachs compared this to a nominal GDP target that would leave rates near zero until 2016, a year longer than the Fed has indicated.


How such views will shape the Fed’s actual policies is unclear. Ms Yellen has not endorsed a higher inflation target or nominal GDP target. The minutes of the Fed’s January policy meeting suggest growing tension between officials’ desire for lower unemployment and concerns that prolonged monetary easing could fuel financial speculation and complicate an eventual exit from stimulus. Officials plan to review the current pace of QE in March.


There is also a question-mark over what this wave of central-bank experimentation can achieve: since bond yields are already so low, the marginal return to coaxing them even lower may be scant. For now, though, buoyant stockmarkets are giving the activists the thumbs-up.