WASHINGTON (Reuters) – European Central Bank President Mario Draghi expressed concern on Saturday about the US Federal Reserve's independence and warning that loss of autonomy could undermine the credibility of the policy.
US President Donald Trump's nomination of two controversial candidates for the Fed's ruling and continuing demand for interest rate cuts has increased the spectrum of government interference, challenging a fundamental principle of modern central bank.
"I'm probably worried about independence in the central bank in other countries, especially … in the main jurisdiction of the world," Draghi said of the United States.
"If the central bank is not independent, then people may well believe that monetary policy decisions follow political advice rather than objective assessment of the economic outlook," he told a press conference.
Governments from Turkey to India and the United States have put increased pressure on their central banks in recent months, igniting a debate on the value of independence.
But some argue that unconventional politics, which is widely used now, redistributes wealth, so monetary policy is constantly making political decisions and thus requires increased political control.
"However, within (their) mandate, central banks should be free to choose what is the best way to comply with the mandate," Draghi said. "Because if you don't let them be free, not responsible. It's the central banking system since the 80's everywhere."
Yet, Draghi claimed he didn't see a similar threat to the ECB's independence given the judicial protection, and he believed either not that cases of disturbance elsewhere undermined global trust. [1
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