Soft power essential for central bank credibility and global cooperation

Paolo Angelini, Deputy Governor of the Bank of Italy, defined soft power as the ability to shape preferences through attraction and persuasion, rather than coercion.

He noted that this concept is losing ground as countries increasingly resort to 'hard power,' leading to rising geopolitical tensions, trade fragmentation, and protectionism.

Despite these challenges, Angelini argued that soft power, rooted in dialogue, is more crucial than ever.

He referenced the Global Soft Power Index, which suggests economic benefits from soft power.

This aligns with central banks' long-held observation that trust, credibility, and effective communication are forms of soft power that influence economic decisions and shape expectations.

Angelini highlighted soft power's role in strengthening the multilateral system, exemplified by the central banking community.

Technical dialogue continues in fora like the International Monetary Fund, World Bank, Basel Committee on Banking Supervision, Bank for International Settlements, and Financial Stability Board.

These platforms facilitate agreement through compromise, even on contentious issues such as climate-related risks.

Progress has been made, particularly in agreeing on a focus for physical risk in financial stability and supervision.

This pragmatic approach maintains open dialogue, investing in soft power to bind cooperation despite diverging interests.