THE BIG PICTURE: Thirty years ago the IMF opened its first regional center for technical assistance. Hosted in Fiji, the center is critical to greater IMF engagement in the Pacific. The model has since been expanded to 17 locations around the world. Above, a woman walks past the Grand Pacific Hotel on a cloudy morning in Suva. IMF Photo/Anirban Mahapatra.
Central Banks Work Best with Independence
CENTRAL BANKS ARE OFTEN criticized for supposedly misusing their independence, and many have faced rising political pressure. Their campaigns to contain inflation by raising policy interest rates created significant political pushback on fears about slower growth, higher unemployment, and diminished fiscal positions, according to Tobias Adrian, IMF financial counsellor and director of the Monetary and Capital Markets Department.
Amid increased calls for more oversight of central banks, Adrian underscored in a June speech to a Bank of Thailand gathering that history shows what’s at stake: “The data is clear,” he said. “Higher central bank independence is associated with lower inflation.”
Because central bank independence is so important to containing price increases and achieving stable economic growth, Adrian and his colleagues developed a global index aimed at helping policymakers strengthen such independence. The IMF also has a tool for central bank balance sheet stress testing, to assess their financial independence.
“While many central banks worldwide are under pressure,” Adrian concluded in the speech, “independence pays of in the long run.”
“ While many central banks worldwide are under pressure, independence pays of in the long run.”
—–Tobias Adrian, IMF financial counsellor and director of the Monetary and Capital Markets Department, at a Bank of Thailand gathering in June 2024.
Overheard
“The battle for global economic prosperity will largely be won or lost in middle-income countries.”
—Indermit Gill, World Bank chief economist, on the launch of this year’s World Development Report, on how developing economies can escape the middle-income trap.
“In principle, industrial policy could be a way of redistributing gains from globalization, but that doesn’t look like the way it’s being deployed at all. And if we have a whole set of policies that are designed to protect domestic economies, then we’re giving up substantial gains from global engagement.”
—Catherine Mann, external member of the Bank of England’s Monetary Policy Committee, in an interview with IMF Podcasts.
AROUND AND ABOUT: This year Paraguay became the first country in South America to tap the IMF’s Resilience and Sustainability Facility. Under the program, the government is committed to expanding its green energy matrix. In July Kristalina Georgieva, IMF managing director, toured the Itaipu hydroelectric dam on the Paraná River. IMF Photo/Daniel Duarte
By the numbers
Citation: Finance & Development 61, 003; 10.5089/9798400276231.022.A002
SOURCE: Official Monetary end financial Institutions Forum.NOTE: Includes European Central Bank and regional Federal Reserve presidents.
