Bloomberg
South Africa’s top monetary policy maker spoke for his peers around the world last week when he declared that threats to central-bank independence from politicians are no longer just an “emerging market phenomenon.â€
The US Federal Reserve, Bank of England and European Central Bank are feeling the heat from elected lawmakers, while India is among others under pressure.
“There’s concern among the central-banking community that the independence of central banks could be under threat,†South African Reserve Bank Governor Lesetja Kganyago said.
The threat could have real economic consequences: A study in the 1990s by economists Alberto Alesina and Lawrence Summers concluded that independent central banks were better at controlling inflation without damaging output or employment.
Financial markets risk being unnerved if investors suspect central banks will bow to lobbying and take their eye off inflation. Here’s a rundown of the monetary institutions getting unwa-nted attention from politicians.
United States
Almost a year into the job, Jerome Powell has run into increasingly harsh criticism from Donald Trump, the first American president in two decades to lash out at the Fed. Just in the past month, Trump said he’s “not even a little bit happy†about his choice of chairman, and called the Fed a “much bigger problem than China.†The central bank has raised interest rates eight times since December 2015, from near-zero, and is teeing up another hike in December.
INDIA
Prime Minister Narendra Modi’s administration has pressured the RBI to hand over more of its surpluses to bridge a budget gap and possibly fund spending before election. The government has also threatened to invoke a never-used law to provide more liquidity and ease lending rules amid a shadow-banking crisis, though it later said the RBI’s autonomy is “an essential and accepted governance requirement.â€
NEW ZEALAND
Legislation requiring the Reserve Bank of New Zealand to adopt a dual mandate of employment and price stability is expected to become law in April. Opponents say that could give finance minister power to influence which of the mandates the central bank should prioritise, undermining its independence.
UNITED KINGDOM
BOE Governor Mark Carney has long faced aggressive criticism from pro-Brexit politicians, who accuse him of overly pessimistic pronouncements and bias against the decision to leave the European Union. Lawmaker Jacob Rees-Mogg calls the governor the “high priest of project fear.†Carney denies the charge, but was assailed again recently after the BOE published scenarios showing that a no-deal Brexit could unleash a savage recession and collapse in the pound.
EURO-AREA
ECB President Mario Draghi is frequently lambasted by German politicians over ultra-loose monetary policy, which they worry robs nation’s savers to benefit of more-profligate member states. More recently he’s been attacked by Italian politicians, including Deputy Premier Luigi Di Maio who said he’s “poisoning the climate†by weighing into the debate about the nation’s budget.
Central banks in Italy, Austria, Greece, Cyprus, Latvia, Slovenia, Switzerland, Sweden, Mexico and Brazil also face similar issues.