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.
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