The Limits of Central-Bank Independence
Central-bank independence has been a pillar of economic policymaking in recent decades, giving monetary authorities the political cover to pursue necessary but potentially painful measures when conditions demand. What matters, however, is not independence per se, but rather the political consensus that underpins it.
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ZURICH – Central banks are not sovereign principalities, and their governors are not sovereign princes. While central-bank independence has been essential to effective policymaking in recent decades – giving monetary authorities the political cover to pursue necessary but potentially painful measures when conditions demand – the limits of the principle are almost certain to become clearer in the coming years.