Central Bank independence: Under threat? Over-rated?

Held on Monday, January 28, 2019


  • John Plender (Financial Times/OMFIF)

  • Lord Skidelsky (University of Warwick)

  • Philip Middleton (OMFIF)

  • Max Rangeley (Cobden Centre)



Anyone with even a passing interest in economics knows: (a) that the high levels of inflation in the 1970s, coupled with a sense that governments around the world could not be trusted to keep their hands out of the cookie jar, meant that central banks had independent responsibility for monetary policy thrust upon them, whether they wanted it or not; and (b) that, with inflation being replaced in public concern by the possibility of recession, there is now a backlash, with some senior economists questioning whether central bank independence is really worth the candle.

This isn’t just an academic exercise. In the US, President Trump has publicly regretted his decision to appoint Jay Powell to the Fed Chairmanship because of his preference for raising interest rates, and, in India, the Governor of the Reserve Bank quit under pressure from PM Modi. Elsewhere, we see Draghi being criticised by German politicians, Erdogan pressuring the Turkish C. Even here, Governor Carney is being criticised by Brexiteers for bigging up the costs of leaving the EU.

In December 2012, John Plender wrote a column for the FT distinguishing between the kind of independence that, say, the ECB has (in that it can set the goals of monetary policy) and that of the BofE (which has operational independence, within parameters laid down by the Treasury) – but also emphasising the need to insulate monetary policy from political interference. The question now is whether that still holds, particularly at a time when inflation seems like a distant memory. I am delighted that John – who, in addition to his perch at the FT is also a non-executive director of the Official Monetary and Financial Institutions Forum – has agreed to kick off the discussion on the pros and cons of central bank independence in today’s world.

I am also delighted that we have three distinguished respondents:

  • Robert Skidelsky (formally Baron Skidelsky of Tilton) is emeritus professor of political economy at Warwick, the biographer of Keynes and a prolific author, most recently of Money and Government. Like a number of other well-known economists (e.g. Willem Buiter and Adam Posen), he is sceptical about the desirability of unrestrained central bank independence.

  • Phil Middleton is deputy chairman of OMFIF and a former head of central banking at EY. He is also a member of the Guernsey Financial Services Commission and a director of Rifle House Capital.

  • Max Rangeley is the manager of the Cobden Centre, a think-tank based on Austrian School economics. One of his concerns is that central bank monetary policy post-2008 is building another (bigger and better) bubble. (You can see Max’s recent speech in the European Parliament here: https://www.youtube.com/watch?v=rMOMdydsTgg).

These are treacherous waters – but enormously important for the financial sector. If you (or a colleague) would like to join us, please let us know by emailing alex@csfi.org or by calling the Centre on 0207 621 1056. As usual, (thanks to the hospitality of Norton Rose Fulbright), there will be plenty of wine and sandwiches to help the medicine go down.

Sincerely yours,

Andrew Hilton