The writer is the founding editor of Central Bank Intel

There must be some nervous central bankers watching the wide-ranging review that has been launched on the Reserve Bank of Australia.

Around the world, central banks have been caught off guard by soaring global inflation, leaving interest rates too low for too long. But the RBA was more blunt than most in admitting its mistakes, with its own governor saying its forecast was “embarrassing”.

“We should better predict this. We didn’t,” RBA Governor Philip Lowe said in May. However, the RBA was not alone in making misjudgments, with central banks from Washington to Frankfurt believing that increases in inflation would be more transitory than they have been.

This is what makes the RBA exam an interesting accountability test. Did the central bank simply make the wrong choice or is there something more systemic that went wrong?

Two elements of the RBA investigation are notable. First, it will be carried out by an independent external panel appointed by the Treasury – two Australian economists plus a former Deputy Governor of the Bank of Canada who is currently an external member of the Bank of England’s Financial Policy Committee.

Central banks like their independence and are used to being in control. It cannot therefore be comfortable for the RBA to see its future influenced by recommendations from outsiders.

Second, it is unusually large with a feeling of “control” or “evaluation” about it. In recent years, reviews of major central banks have focused more narrowly on a particular aspect of monetary policy strategy, central bank law or governance related to special tools or functions.

This will examine just about everything at the RBA – the continued appropriateness of its inflation targeting framework, the interaction of monetary policy with fiscal and macroprudential policy, and governance arrangements. It will also discuss the choice of tools, the implementation of policies, communication and “how the trade-offs between different objectives have been managed”. Even its culture, management and recruitment processes will be assessed.

The reaction from the RBA’s New Zealand counterpart proves how pissed this has made other central banks. Less than a week after the RBA review was announced, a research paper co-authored by former RBNZ Governor Graeme Wheeler blamed central bank policy mistakes for high inflation.

Shortly thereafter, current Governor Adrian Orr issued a statement admitting that the RBMZ’s monetary policy had contributed to high inflation. He went further and announced a review of the RBNZ’s monetary policy performance, including the use of additional policy tools. This review is in addition to the recently started five-year review of its monetary policy mission.

The RBA probably leads the central bank pack in admitting its mistakes. But central banks around the world are being criticized for maintaining accommodative monetary policy longer, misjudging not only the onset of inflation but also its persistence, and also issuing overly explicit forward guidance on monetary policy, then not s can’t stand it.

As part of its forward guidance, the RBA had indicated that it would keep rates as low as possible until 2024. This low rate environment has not only failed to combat rising inflation, but has also contributed to exacerbating the real estate boom in Australia – a significant systemic risk.

Already, forward orientation is being abandoned worldwide. Last month, Fed Chairman Jay Powell abandoned his policy of providing detailed commentary on what his central bank would do next on interest rates. “It’s time to just go meeting by meeting and not provide the kind of clear guidance that we provided,” Powell said at a press conference after the Fed.

Similarly, the European Central Bank also dropped its forward guidance on policy last month. “We are much more flexible; in that we do not offer any kind of forward guidance,” said ECB President Christine Lagarde. “From now on, we will make our monetary policy decisions based on the data, [we] will work month by month and step by step.

Earlier this week, the RBA joined the trend by signaling that it will no longer give explicit forward guidance: “The Board expects to take further steps in the process of normalizing monetary conditions over the months to come, but it’s not on a predefined path.”

If inflation does not come down and interest rates rise significantly, it will not just be forward-looking policies that will come under scrutiny. More central banks around the world will come under official scrutiny. Australia’s review will likely not be the last.