IMF chief says countries ‘must’ strengthen central bank independence

In recent decades, many countries around the world have increased the autonomy of central banks, tasking them with fighting inflation and restoring stable prices.

These actions have proven critical to the recent success many countries have had in fighting post-pandemic surges in inflation around the globe, International Monetary Fund managing director Kristalina Georgieva wrote in a blog post published Thursday.

“Central bank independence matters for price stability — and price stability matters for consistent long-term growth,” she said.

“Financial stability benefits the whole economy and reduces the risk that the central bank becomes reluctant to raise interest rates for fear of causing a financial meltdown,” she added.

Georgieva contrasted the years since the Covid-19 pandemic with the high inflationary period of the 1970s, arguing that a lack of central bank independence at that time meant politicians were often pressured to take actions that undermined price stability.

“When central banks and governments each play their roles, we have seen better control of inflation, better outcomes in growth and employment, and lower financial stability risks,” she said.

“With such high stakes, we must preserve and strengthen central bank independence,” she added.