By Howard Schneider

WASHINGTON (Reuters), Jens Weidmann of German Bundesbank, was just one year into the tenure. Then came three words that changed the course of history.

Mario Draghi (then-president of European Central Bank) spoke in July 2012 and promised to “do whatever it takes” in order to maintain the eurozone together. This was not, it turns out, another step in Europe’s crisis.

This was part of a global revolution in monetary policymaking, which left Weidmann – and traditionalist inflation hawks such as him at the ECB and the U.S. Federal Reserve – with less influence.

The announcement Wednesday by the German central banker that he was retiring at the end of the year marked the culmination of a decade of economists’ thoughts about inflation and global interest rates. It also marks the beginning of a new era in economics. Economists have diverged from the core principles of government austerity and strict inflation control.

Weidmann could rant against the new orthodoxy which emerged under his watch. However, he was unable to stop it.

The last financial crisis was fought by central banks using years of low interest rates, massive money printing, and then a rash decision from the hawks to bring inflation back up to their 2 percent target.

“Years passed. “Years went by. Inflation didn’t go back to its target. Ireland explained that as the concern increased about the world’s stagnation in low interest rates, low inflation, and high levels of unemployment, the “conservative central banker” became more hopelessly out-of-date.

It would be a topic of academic and official research to understand why and what this meant for central bank and government fiscal policies.

The Fed and the ECB were the central banks that concluded that inflation was under control. However, the threat of it being too low was more dangerous to growth, financial markets, and the economy than that of being too high. This environment allowed policymakers to forget inflation concerns and take action against the pandemic.

They made massive bondbuying (or quantitative easing as it is known in the official language) a part of their permanent toolkit. It was no longer an unusual “unconventional tool” to be avoided.

The fiscal side saw cheap borrowing as an opportunity to borrow the trillions required to support families and businesses during this pandemic.

A decade or more ago, there would have been long drawn out battles. This one has seen broad acceptance that such measures are needed.

Recent inflation spike has raised concerns that combination of low monetary policy with record-setting deficits could still lead to the poor inflation outcomes Weidmann warned against.

However, his successor in Germany might be hawkish and true to the legacy of the Bundesbank, but the tone could by necessity be softer due to the ECB’s wide embrace for higher inflation, major climate initiatives, and other policy changes, said Evercore ISI vice-chair Krishna Guha.

“We should not expect Weidmann’s successor to be anything other than hawkish relative to the New Keynesian U.S.-led central banking consensus that has steadily gained ground in the Eurosystem as well,” Guha wrote.

Guha explained that “hawks are available in different colors, so it doesn’t really matter which type we get”. He will likely be replaced by someone a little less, but it is plausible.

These voices are becoming more temperate at the Fed. Former officials are the most ardent believers, who often comment on academic conferences or in financial media.

Even policymakers who are most worried about inflation or most skeptical of the future world will be along for the ride, at least for the moment.