Central banks worldwide must preserve their independence, European Central Bank President Christine Lagarde said on Thursday.
Speaking at a conference in Cambodia, Lagarde noted that central banks in advanced economies have lessons to learn from those operating in emerging markets.
Concerns over threats to central bank independence have intensified in recent periods, particularly following public pressure by US President Donald Trump on the Federal Reserve to cut interest rates, including criticism of its former chair Jerome Powell.
In Europe, ECB executive board member Isabel Schnabel warned earlier this month of a “gradual erosion” of central bank independence, as rising public debt could lead to pressure to keep borrowing costs low.
Addressing the conference, Lagarde said the question is no longer simply how to guarantee independence, but how to defend it when it comes under strain.
“The question is how to protect that independence when it is tested,” she told an audience of francophone central bankers from across the world, including the Middle East and West Africa.
She added that many of the central banks represented at the conference have long operated under more challenging structural conditions.
“We have more to learn from your experience than the other way around,” she said.
Lagarde also pointed to lessons from the oil shock and stagflation of the 1970s, noting that countries with less independent central banks experienced higher inflation.
“These findings highlighted the need to shield monetary policy decisions from the electoral cycle,” she said.
“To best serve the public interest, a central bank must remain close enough to the state, but sufficiently independent to resist the pressures of the moment,” she added.
Source: CNA
