European Central Bank President and former International Monetary Fund (IMF) chief Christine Lagarde on Thursday warned that central banks worldwide must protect their independence as political and economic pressures grow.
Speaking at a conference in Phnom Penh, Cambodia, Lagarde said governments, economic shocks and declining public trust were increasingly testing central banks, according to an agency report.
“The question is no longer simply how to guarantee independence” of central banks, she said. “It is how to protect it when it is put to the test.”
Her comments come as concerns rise globally over political interference in monetary policy. In the United States, President Donald Trump has repeatedly pressured the Federal Reserve to cut interest rates.
He also publicly attacked former Fed Chair Jerome Powell and launched a criminal investigation against him, which was later dropped.
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In Europe, ECB board member Isabel Schnabel recently warned that central bank independence was facing a “quiet erosion” as rising government debt could pressure policymakers to keep borrowing costs low.
Addressing francophone central bankers from regions including the Middle East and West Africa, Lagarde said central banks in emerging markets had valuable experience dealing with difficult economic conditions.
“Many of the central banks represented here today have long operated under structurally more challenging conditions,” Lagarde said.
“We have more to learn from your experience than the other way around,” she added. “You have long practised the work that has now become the task of all.”
Lagarde said lessons from the oil shocks and stagflation of the 1970s showed why central bank independence remained essential. Countries with weaker central bank independence, she noted, tended to experience higher inflation.
“This evidence underscored the need to shield monetary policy decisions from the electoral cycle,” she said.
“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 also warned that repeated economic disruptions and weakening trust in public institutions could undermine the authority of central banks.
“It is precisely when monetary policy decisions are politically fraught and economically costly that credibility is most needed,” she said.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X