[A]s the central banks become more desperate to boost inflation and growth, they are starting to break one of the modern tenets of the profession by funneling that cash directly to what they regard as “good” uses.
The Bank of Japan’s conditions for companies to qualify for exchange-traded funds it would like to buy sound like they come from a well-meaning government minister…. Companies could qualify by offering an “improving working environment, providing child-care support, or expanding employee-training programs.”
Consider the ECB. It plans to pay banks to borrow from it for up to four years so long as they use the money to help the “real” economy
rather than use the money for explicitly, specifically sound business reasons. With the “help” and the “real economy” bits defined by the Central Planner Bank.
However, as James Mackintosh put it in his Wall Street Journal article at the link,
All these are eminently reasonable things to demand of companies, especially Japanese firms. All would probably be good for the economy, too.
However, they have nothing to do with monetary policy. The basic aim of central banks is to adjust the overall economy while leaving the market and government to decide the best use of capital, decisions that are inherently political.
To paraphrase a man from a different venue, the way to combat inflation is to combat inflation. Set the benchmark interest rates at levels historically consistent with the Fed’s target inflation rate, and then leave them alone. Let the free market fluctuate around them as it will: the market—the invisible hand—knows best what the appropriate allocation of resources is; neither any central bank nor any other central planner can ever know that.