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Mervyn King and Dan Katz

Central Banks Are Risking Their Independence

The Federal Reserve, European Central Bank and Bank of England all seem willing to take on vexing social challenges. If they aren’t careful, they may end up losing their autonomy.

Keep your distance.

Keep your distance.

Photographer: Al Drago/Bloomberg via Getty Images

Central bankers and journalists will assemble for the virtual Jackson Hole conference later this week. Their agenda will be broad. The future path of quantitative easing, the health of the labor market, and other critical monetary and regulatory matters will command center stage. But we can also expect pronouncements on issues once considered the domain of elected politicians, including climate change, racial justice and inequality.

The emergence of central-bank commentary on hot-button political issues is a significant departure from the practice of just a generation ago. Central bankers who lived through the 1970s remembered the experience of high and volatile inflation. They saw independence as essential to the ability of central banks to maintain economic stability. And this autonomy went hand in hand with clear goals and mandates, such as inflation targets.