President of the European Central Bank, Christine Lagarde, has emphasised the importance of protecting the independence of central banks amid growing political and economic pressures around the world.
Speaking on Thursday at a conference in Phnom Penh, Cambodia, Lagarde said the challenge facing monetary institutions today is no longer only about securing independence, but ensuring it is protected when tested.
“The question is no longer simply how to guarantee independence,” she said. “It is how to protect it when it is put to the test.”
Lagarde noted that central banks in emerging markets and developing economies have long operated under difficult economic and political conditions, adding that advanced economies could learn valuable lessons from their experiences.
“We have more to learn from your experience than the other way around,” she told central bankers from regions including the Middle East and West Africa attending the conference.
Her remarks come amid increasing global concerns over political interference in monetary policy, especially in the United States, where President Donald Trump has repeatedly criticised the Federal Reserve over interest rate decisions.
Lagarde also pointed to lessons from the 1970s oil crisis and stagflation period, saying countries with less independent central banks historically recorded higher inflation rates.
“This evidence underscored the need to shield monetary policy decisions from the electoral cycle,” she explained.
According to the ECB president, central banks must strike a balance between working closely with governments and remaining independent enough to resist political influence.
“To best serve the public interest, a central bank must be close enough to the state — but independent enough to resist the pressures of the moment,” she added.
Lagarde further warned that increasing economic shocks and declining public confidence in institutions could weaken the authority and credibility of central banks globally.
“It is precisely when monetary policy decisions are politically fraught and economically costly that credibility is most needed,” she said.
Her comments followed recent remarks by ECB board member Isabel Schnabel, who warned that rising government debt levels could gradually weaken central bank independence by increasing pressure on policymakers to maintain lower interest rates.
