The dual mandate of the Federal Reserve is "too complicated a job for central banks to do, where the temptation to act opportunistically becomes almost irresistible," while inflation-targeting is the right objective for a central bank, former MPC member Professor Willem Buiter told CNBC Europe in a television interview.
Last month, Buiter sparked a fierce debate during the Jackson Hole conference for criticizing the Federal Reserve’s handling of the credit crunch, suggesting that the Fed was too close to the leading financial institutions to act in the best interests of the economy.
Buiter, currently a Professor at the London School of Economics, also said he was not as convinced that the "disinflation that is in the works is going to be as sustained or spectacular as all that… as soon as the world economy picks up, commodities will go up again."
Meanwhile he believes that there is "no chance at all" for a rate cut anytime soon from the ECB, despite the fact that the economy has weakened quite considerably, as the ECB most likely wants to "put fingers in the wounds before doing so and wants to see headline inflation come down first."
In the UK, where the Bank of England also has an inflation-targeting mandate, Buiter believes that the slide in sterling in recent weeks will counteract the decline in commodity prices and the fact that the UK economy is "tanking".
"The weakness of the sterling must be a source of concern for the people who have the official mandate in mind," he said.
However, "in the short term it (sterling's weakness) will also probably be the salvation for the real economy," Buiter added.