To Whom Do Central Banks Listen?

Abstract Central banks are often seen as aligned with financial markets, yet this alignment does not fully capture the constituencies with which monetary authorities have a relationship. As public institutions, central banks derive authority not only from market credibility but also from broader legitimacy within democratic societies. This chapter examines how central banks strategically navigate competing demands from markets and the public by mobilizing reputation, a key resource shaped through economic imaginaries that define what role central banks should play in the economy. Focusing on the post-2020 period, the chapter shows how the Federal Reserve and the European Central Bank recalibrated their imaginaries in response to rising contestation. The Fed reframed its employment mandate around the objective of “broad-based and inclusive,” while the ECB integrated climate concerns into its operational framework following increased societal pressure. These shifts did not entail a break from orthodoxy. Rather, they selectively incorporated new goals within the prevailing imaginary centered on market credibility and price stability. By tracing the transformations in the United States and Europe, the chapter argues that such discursive adjustments constitute a reputational strategy aimed at preserving institutional authority and the political status quo. In doing so, the chapter advances a larger claim: monetary authorities are not neutral economic managers but political actors who shape social conflicts and power relations. Their influence operates not only through policies but through the imaginaries they deploy, which also serve as tools of legitimation and power within technocratic governance.