By Balazs Koranyi<\/p>\n
DUBROVNIK, Croatia, May 30 (Reuters) – Central bank independence is again coming under pressure as policymakers push through unpopular measures to curb surging prices, prompting political interference \u200cthat could erode trust and deepen the crisis, current and former officials said.<\/p>\n
Inflation has picked \u200cup worldwide since the war in Iran drove up oil prices, forcing central banks to raise interest rates or delay \u200bpreviously signalled cuts to stop a one-off shock becoming entrenched.<\/p>\n
“It’s easy to be an independent central banker member when inflation is low … and it’s much more complicated when inflation is up and you have to do things that people do not like,” Helge Berger, deputy director at the IMF’s European Department, told \u200ca conference on Saturday.<\/p>\n
“It’s hand to \u2060hand combat,” he said. “We need to get the current situation right.”<\/p>\n
INDEPENDENCE HARD TO REBUILD WHEN DAMAGED<\/p>\n
The most visible challenge to independence has been U.S. President Donald \u2060Trump’s repeated calls for lower interest rates, but political pressure has been widespread and often more subtle in other places, policymakers said.<\/p>\n
Some central banks are asked to tailor policy to support industrial goals, others face pressure \u200bto transfer \u200bprofits to state budgets, while some are given conflicting \u200bmandates.<\/p>\n
High government debt levels also act \u200cas a de facto constraint on independence, limiting room to tighten policy because higher interest rates – the usual cure for inflation – risk triggering a debt crisis.<\/p>\n
Once markets doubt that a central bank is acting independently to fight inflation, they begin to price in policy accommodation, making it even harder to rein in price rises.<\/p>\n
“Independence is often taken for granted when it works, but difficult to rebuild once \u200cit has been damaged,” Bundesbank board member Burkhard Balz said. “Monetary \u200bpolicy needs protection from short-term political incentives if it is \u200bto deliver price stability.”<\/p>\n
Some speakers argued, however, \u200bthat central banks’ slow response to the 2021-22 inflation surge also dented \u200ctheir credibility.<\/p>\n
Policymakers described the shock as transitory for \u200bmonths before grasping its \u200bscale and launching one of the fastest tightening cycles on record.<\/p>\n
“Why did they come from behind? One of the reasons, I think, is our inclination and fixation to be what is \u200bcalled data dependent,” former Bank \u200cof Israel Governor Jacob Frenkel said.<\/p>\n
“Data dependence is saying, until I see this happening, I’m \u200bnot going to respond. By definition, when things are already there, you’re coming from \u200bbehind.”<\/p>\n
(Reporting by Balazs Koranyi. Editing by Mark Potter)<\/p>\n","protected":false},"excerpt":{"rendered":"By Balazs Koranyi DUBROVNIK, Croatia, May 30 (Reuters) – Central bank independence is again coming under pressure as…\n","protected":false},"author":2,"featured_media":995508,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[3090],"tags":[51,130530,6725,1700,276237,276238,37988,478,2662,28403,16,15],"class_list":["post-995507","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-central-bank-independence","tag-central-banks","tag-economy","tag-european-department","tag-helge-berger","tag-independence","tag-interest-rates","tag-oil-prices","tag-policymakers","tag-uk","tag-united-kingdom"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/116666786623288300","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/995507","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=995507"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/995507\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/995508"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=995507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=995507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=995507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}