The irrelevance of monetary policy or the battle of chicken with the fiscal side of government

 “Central banks cannot resolve unsustainable fiscal policies. The only real solution lies with the fiscal authority”
- Charles PLosser  Philadephia  Fed President

Monetary policy is not a panacea, I would be more comfortable if Congress would take some of this burden from us.”
- Ben Bernanke

“I do not think it would be right for monetary policy to compensate for other instiutions’ lack of action.”

-ECB president Draghi

There is a current theme running from central bankers to the fiscal authorities. We cannot solve your problems. We will not solve your problems. This places the market in a dangerous situation. The fiscal authorities have to do something to get monetary cooperation, but what central bankers want is austerity and that is not what governments want to give. It also may not be the right policy. 

There is not much that central banks can do with rates down close to zero. They cannot monetize Treasury assets and they do not want to buy risky assets except as a last resort. The policy of raising inflation targets is not being discussed in polite company, but is the choice that may be most helpful to the fiscal authorities.