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The managing director of the IMF issued a call on Thursday for nations to “maintain and enhance” the independence of central banks to uphold price stability and foster sustained economic growth.
Over the past few decades, numerous countries worldwide have bolstered the autonomy of their central banks, entrusting them with the responsibility of combating inflation and ensuring stable prices.
These measures have played a pivotal role in the recent success achieved by many countries in combating post-pandemic inflationary pressures across the globe, as noted by Kristalina Georgieva, managing director of the International Monetary Fund (IMF), in a blog post published on Thursday.
“Central bank independence is crucial for price stability — a fundamental prerequisite for sustained long-term growth,” she emphasized.
Georgieva underscored the importance of financial stability for the overall economy, emphasizing that it mitigates the risk of central banks hesitating to raise interest rates due to fears of triggering a financial crisis.
Drawing a comparison between the post-Covid-19 era and the high inflation period of the 1970s, Georgieva highlighted that the lack of central bank independence during that time often led to political pressures that undermined price stability.
“When central banks and governments each fulfill their roles, we witness better inflation control, improved growth and employment outcomes, and reduced risks to financial stability,” she remarked.
Given the significant implications at stake, Georgieva stressed the imperative to safeguard and reinforce central bank independence.
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