During an International Monetary Fund meeting in Washington, European Central Bank President Mario Draghi expressed his concern over the independence of the US Federal Reserve.
Draghi weighed in on the debate of political interference in monetary policy, especially “in the most important jurisdiction in the world,” referring to President Donald J. Trump’s expression of monetary policy preferences.
The Indian and Turkish governments have often expressed the view that monetary policy should be an instrument under executive control. The argument put forward is that since the application of “unconventional” measures for over a decade, Central Bank policies are often redistributive and, therefore, not neutral.
Weighing more broadly on the debate Draghi expressed the view that “central banks ought to be left free to choose what is the best way to comply with their mandates.”
This view was also echoed by the IMF Managing Director, Christine Lagarde. Indirectly, Swiss National Bank President Thomas Jordan made the point that central banks are accountable to parliaments in as far as they set policy goals.
However, since unconventional policies were pursued in 2008 to allow the global economy to recover, many have argued that Central Banks are too political.
As far as the Eurozone is concerned, Draghi made clear that the ECB’s independence is not being called into question.