Politicians Must Protect Central Bank Independence, Rajan Says

  • Cites attacks on Bank of England over Brexit in remarks
  • Governments should look beyond ‘uninformed’ criticism: Rajan

Governments around the globe must protect the independence of central banks to ensure sustainable economic growth, Reserve Bank of India Governor Raghuram Rajan said on Tuesday.

The former International Monetary Fund chief economist said that central banks are under fire from criticism that is unsupported by evidence. He cited attacks against the Bank of England over Brexit, the European Central Bank’s move to stabilize peripheral economies and the Federal Reserve’s interest-rate guidelines.

“Criticism comes with the territory, and central banks need to make the case for their policies," Rajan said in Mumbai, according to a press statement. “At the same time, it is important that governments around the world look beyond sometimes uninformed and motivated public criticism and protect the independence of their central bank to act."

Rajan, an outspoken critic of unconventional monetary policy, has often said that central banks are under too much pressure to boost growth. He plans to step down from his role as India central bank governor when his term ends in September, an announcement that came after a prominent member of Prime Minister Narendra Modi’s party criticized him for keeping interest rates too high.

Rajan repeated the need for central banks to keep inflation under control, arguing that large price gains hurt the poor and eventually lead to a crisis. He also called for India to continue cleaning up bad loans in the banking system.

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