Why Should Central Banks Be Independent?
Last month Donald Trump fueled a debate when he called the Fed crazy. Political accusations started flying all across the media. However, it raised a very important point. The world realized that Donald Trump is not in control of the Federal Reserve which is the central bank of the United States. To the financially savvy, this was no revelation at all. However, a majority of the people believe that central banks are in complete control of their government.
However, this is not the reality, at least, not in recent times. For instance, the Bank of England had been controlled by the government to a large extent until the year 1997. After 300 hundred years of its existence, the Bank of England was finally able to become an independent body in 1997. It was the not the only central bank to do so. Ever since the 1970s, central banks all over the world had been lobbying for financial independence. The OPEC shocks of the 1960s and 1970s had exposed the weakness of the central banks. All throughout, the 1960s and 1970s, inflation was running at double digits in Europe. Central banks needed greater autonomy to fix this problem. They were given this autonomy. As a result, almost all the central banks in the world are free from political influence. This policy has its pros and cons. In this article, we have described the advantages and disadvantages of having an independent central bank.
Advantages
Having an apolitical central bank obviously has many advantages. Some of them have been listed below.
Disadvantages
Separating the central bank from the state has many advantages that have been listed above. However, there are some disadvantages as well.
In summary, one can say that there are pros as well as cons to having independent central banks. However, the pros seem to be outnumbering the cons as of now. This is the reason why central banks across the world have witnessed increased autonomy.

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