Central Bank Independence Under Threat in the US and Italy

Governments across the world are increasingly questioning the autonomy of their central banks, putting the relationship between the two at stake.

Earlier this week, a report cited that President Donald Trump has looked at ways to legally demote Federal Reserve Chairman Jerome Powell. Trump has often publicly criticized the monetary policy decisions taken by Powell – the president believes that there should be more stimulus.

Meanwhile, in Italy, the anti-establishment government has prepared a bill that would give the government further powers over the appointment of members to the Bank of Italy, Reuters reported Thursday. The current coalition, between the leftist Five Star Movement and the right-wing Lega party, has also publicly criticized Governor Ignazio Visco.

“There is a real crisis brewing over the independence of central banks,” Erik Jones, professor of European studies and international political economy at the Johns Hopkins University told CNBC via email.

He mentioned three reasons behind such challenge: banking supervision, unconventional monetary policy, and standard conduct.

“And part of the crisis has to do with the standard conduct of monetary policy, which is where Trump’s criticism of Powell comes into the picture. Of the three challenges, the one that Trump poses is the most important,” Jones said.

via CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.