No Hurdle For Low Rates

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No Hurdle For Low Rates

Central Bank Independence Is No Hurdle For Low Rates

According to ECB Villeroy, the independence of the central bank is not a hindrance to the low interest rates. This comes at a time when the US Federal Reserve's independence is at stake due to the White House's interference.

The pressure on the US Fed is at all times high, and it is coming from no other than the US President. The government wants the US central bank to cut the rates as it believes it is slowing down the economy.

Us Federal Reserve Independence At Risk

The US president doesn't like Powell, and everyone knows about it. Recently, he also tried to fire the Fed Cook, which once again highlighted how the Fed's autonomy is at stake.

But now, an ECB official has come to the support of the US Federal Reserve. His recent comments stressed how independence isn't something that blocks the path to low rates.

He also added that independence is actually a requirement for the banks to actively monitor policies and lower the rates when needed.

ECB Villeroy also added how the independence of central banks allowed them to control inflation. If we look today, inflation has been controlled by the US, Europe, and the rest of the world.

So without an independent central bank, it wouldn't have been possible to control inflation. The key instrument used by most central banks to control inflation is a higher interest rate policy.

Now, most central banks, including the US Federal Reserve, are slowly introducing the rate cuts. However, the US President is not impressed as he believes the pace of rate cuts is slow.

ECB President also issued a statement that if the Fed loses its independence, it would have major repercussions for the entire global economy.

Meanwhile, the BoE governor also came to the support of the US Federal Reserve and said they are very concerned.

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