TOKYO: Pressures on central bank independence are likely to grow as public dissatisfaction over supply-shock-driven inflation may tempt politicians to assign blame to central banks, former Federal Reserve executive Donald Kohn said on Wednesday. U.S. President Trump's efforts to pressure the Fed may be extreme, but they emerge from broader political and economic developments across many democracies, he added. Central banks face difficult times as supply shocks, such as the energy crisis caused by the Iran war, complicate their efforts to achieve low, stable inflation, said Kohn, who retains close contact with incumbent policymakers.
Falling real incomes would heighten public dissatisfaction and increase the temptation for political leaders to assign blame to central banks, Kohn said in a speech to a group of Japanese, U.S. and European central bank executives attending a BOJ-hosted conference in Tokyo. "Ironically, these circumstances strengthen rather than weaken the case for independence," he said in a keynote lecture.
