What does central bank independence mean?

It refers to the institutional and operational autonomy of a central bank to conduct monetary policy without direct political intervention from the government or other bodies.

Why is central bank independence considered beneficial?

Proponents argue it leads to better price stability, lower inflation, and enhanced economic credibility by shielding monetary policy from short-term political cycles and pressures.

What are the arguments against central bank independence?

Critics often cite concerns about democratic accountability, as unelected officials wield significant economic power, potentially prioritizing inflation over other goals like employment or growth.

How is central bank independence typically established?

It is usually enshrined in law, defining the central bank's mandate, the appointment and dismissal processes of its leadership, and its control over its budget and policy tools.