European Central Bank President Christine Lagarde has stressed the importance of preserving the independence of central banks amid growing political and economic pressures across the world.
Lagarde, who previously served as Managing Director of the International Monetary Fund (IMF), made the remarks on Thursday during a conference in Phnom Penh, Cambodia, where she addressed francophone central bankers from regions including West Africa and the Middle East.
Her comments come at a time when concerns are mounting globally over political interference in monetary policy decisions, particularly in the United States.
U.S. President Donald Trump has repeatedly pressured the Federal Reserve to cut interest rates and had publicly criticised former Federal Reserve chairman Jerome Powell before a criminal investigation against Powell was eventually dropped.
Speaking at the conference, Lagarde said the challenge facing monetary institutions was no longer only about guaranteeing independence, but also about protecting it during difficult periods.
“The question is no longer simply how to guarantee independence.
“It is how to protect it when it is put to the test, ” she said.
Lagarde noted that central banks in developing and emerging economies had long operated under difficult and unstable conditions, adding that advanced economies could now learn valuable lessons from them.
“Many of the central banks represented here today have long operated under structurally more challenging conditions.
“We have more to learn from your experience than the other way around. You have long practised the work that has now become the task of all, ” she said.
Her remarks followed recent warnings from European Central Bank board member Isabel Schnabel, who cautioned that central banks were facing what she described as a “quiet erosion” of their independence.
Schnabel argued that rising government debt levels could place pressure on central banks to maintain low interest rates even when inflation concerns require tighter monetary policies.
Lagarde also referenced the economic crises of the 1970s, particularly the oil shock and stagflation period, saying those events demonstrated why independent central banks remain critical for economic stability.
According to her, studies have consistently shown that countries with less independent monetary institutions tend to experience higher inflation and weaker price stability.
“This evidence underscored the need to shield monetary policy decisions from the electoral cycle
“To best serve the public interest, a central bank must be close enough to the state, but independent enough to resist the pressures of the moment, ” she said.
The ECB president also warned that declining public trust in institutions and the increasing frequency of global economic shocks could weaken the authority and credibility of central banks if not properly managed.
“It is precisely when monetary policy decisions are politically fraught and economically costly that credibility is most needed,” Lagarde added.
Her comments are expected to reignite debates over the role of governments in influencing monetary policy, especially at a time when many economies are battling inflation, slowing growth and rising public debt
