Huw van Steenis argues that central banks’ policy failures may reflect weak macroeconomic models. The great financial crisis, post-pandemic inflation surge, and collapse of Silicon Valley Bank exposed these limits. As the Bank of England prepares to host a conference honouring Charles Goodhart, who turns 90 in October, van Steenis draws four lessons.

First, institutions matter. Banks are not frictionless conduits; their balance sheets and incentives shape monetary policy. The collapse of Silicon Valley Bank shows that the lesson has not been fully absorbed. Goodhart says every Monetary Policy Committee should include members who understand the plumbing of financial intermediaries. The answer to banking monoculture is greater diversity across public and private markets, not less regulation.

Second, fiscal pressures can unanchor price stability. Public debt and deficits, repeated crises, and populism have weakened central bank independence since the period from the late 1980s until 2008. The Federal Reserve’s new task forces are important because they assess AI and improve data and models.

Third, economic models must incorporate failure as a feature of capitalism. Finally, demography may prove more powerful than the debates consuming central bankers.