Over the past decade, the world’s central banks have become increasingly independent, which has a positive effect on their nations’ economies. It is well known that the less subordinate a central bank is to the government, the more moderate the rates of inflation are. Usually, a tight monetary policy is implemented in those states where central banks do not have to fix budget and social policy problems, rehabilitate financial institutions and support inefficient enterprises.
In 2020, the Bank of England classified more than 150 central banks as independent. The autonomy of the European Central Bank is guaranteed by the Treaty on European Union, and the Federal Reserve system in the U.S. is also independent.
In countries with developing markets, pressure from political leaders on central banks is common. The independence of the central bank makes it difficult for politicians to stimulate the economy, since some banks oppose fiscal expansion. Central banks have become less rigid and more willing to take into account, at the request of the public, factors such as employment and the level of economic activity, in addition to inflation. Nevertheless, increasing such demands on regulators may lead to political pressure to distort monetary policy. And here, it is important to set a limit and not cross it, so as not to lose the hard-earned gains.
