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  HOME | Business & Economy (Click here for more)

ECB Chief: Threats to Central Bank Independence Becoming Big Risk

BALI, Indonesia – The European Central Bank President Mario Draghi said on Saturday threats to the independence of central banks have emerged as a significant risk to the global economy.

Draghi said he had grown concerned geopolitical risks might lead to an abrupt “snapback” of higher interest rates.

He cited three factors as threats to the key “pillars” of the international economy: trade tensions, threats to the rules on which the European Union was built, and a “willingness to discuss the independence of central banks.”

His remarks come after a week in which United States President Donald Trump lobbed repeated criticisms at the ECB’s American counterpart, the Federal Reserve.

After the US stocks posted their biggest decline in more than seven months, Trump said the Fed had “gone crazy” and was making a mistake by lifting interest rates.

Draghi, speaking to reporters in Bali, Indonesia, at the annual meetings of the International Monetary Fund and World Bank Group, cited these geopolitical risks as something that could lead to a “sharp repricing in assets” across the Eurozone, as well as a “sharp and sudden increase in interest rates” that would slow the economy via the burden of increased borrowing costs.

While central bankers frequently express concerns about their independence, Draghi said that the threats are increasingly front-page news, and that “you can see the executives are asking central banks to do things, which is not exactly the way to respect central bank independence.”

Draghi, who did not mention the Fed or Trump directly, noted that there are other countries where the issue has been a concern, such as Turkey, and that he is expressing “a general sense of the risks in the geopolitical sphere” not aimed at just one country.

 

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