Central banks are facing challenges to their independence in some parts of the world, and increased political power might make it more difficult for banks to control inflation, increasing the danger of economic instability, European Central Bank President Christine Lagarde stated Monday.
Last week, US President Donald Trump declared that he would insist that the Federal Reserve cut borrowing prices, saying he was far more knowledgeable about interest rates than those who make that choice.
Politicians have been intruding into a space that has been mostly off-limits to them for decades, even though the remark is seen as more bluster than a proposal to undermine the Fed’s independence.
“While recent research suggests that de jure central bank independence has never been more prevalent than it is today, there is no doubt that the de facto independence of central banks is being called into question in several parts of the world,” Lagarde said at a central bank conference in Hungary.
Despite the ECB’s anticipated rate decrease, the Fed is expected to maintain interest rate stability this week. The Fed claims that inflation is only gradually declining and that certain Trump administration policy initiatives may potentially exacerbate price pressures. This move is likely to draw condemnation from the White House.
Speaking following Lagarde, Jean Boivin, the director of BlackRock Investment Institute, stated that managing independence will be challenging.
“We haven’t been in a situation where we have to deal with inflation at such a high debt level,” Boivin explained. “The conflict that’s going to create for me is real.”
“That independence is not something you just assert; it’s something you need to manage and that management is going to get tricky now going forward,” he maintained.
Most central banks have swiftly increased interest rates in recent years to combat inflation, which has limited government spending since fast price increases have reduced real earnings. Central banks are facing challenges to their independence in some parts of the world, and increased political power might make it more difficult for banks to control inflation, increasing the danger of economic instability, European Central Bank President Christine Lagarde stated Monday.
Last week, US President Donald Trump declared that he would insist that the Federal Reserve cut borrowing prices, saying he was far more knowledgeable about interest rates than those who make that choice.
Politicians have been intruding into a space that has been mostly off-limits to them for decades, even though the remark is seen as more bluster than a proposal to undermine the Fed’s independence.
“While recent research suggests that de jure central bank independence has never been more prevalent than it is today, there is no doubt that the de facto independence of central banks is being called into question in several parts of the world,” Lagarde said at a central bank conference in Hungary.
Despite the ECB’s anticipated rate decrease, the Fed is expected to maintain interest rate stability this week. The Fed claims that inflation is only gradually declining and that certain Trump administration policy initiatives may potentially exacerbate price pressures. This move is likely to draw condemnation from the White House.
Laptops 1000Speaking following Lagarde, Jean Boivin, the director of BlackRock Investment Institute, stated that managing independence will be challenging.
“We haven’t been in a situation where we have to deal with inflation at such a high debt level,” Boivin explained. “The conflict that’s going to create for me is real.”
“That independence is not something you just assert; it’s something you need to manage and that management is going to get tricky now going forward,” he maintained.
Most central banks have swiftly increased interest rates in recent years to combat inflation, which has limited government spending since fast price increases have reduced real earnings.
