The writer is the author of ‘The Price of Time: The Real Story of Interest’

A great experiment in monetary policy is drawing to a close. Last week, the European Central Bank announced its largest rate hike in two decades, taking its benchmark rate back to just zero per cent. Never before, over the course of some 5,000 years of lending, have interest rates sunk so low. Those who rue the consequences of easy money are quick to blame central bankers. But the problem originates with the strict inflation mandates they are required to follow.

In 1990, the Reserve Bank of New Zealand became the first central bank to adopt a formal target. In 1997 a newly independent Bank of England was also given a target, as was the ECB when it opened for business a year later. After the global financial crisis, both the Federal Reserve and Bank of Japan jumped on board. What BOJ governor Haruhiko Kuroda called the “global standard” — an inflation target in the range of 2 per cent — performed several functions: providing central banks with a clearly defined benchmark, anchoring inflation expectations and relieving politicians of responsibility for monetary policy.