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By Luke Heighton
FRANKFURT (MNI) - Central bank independence is under threat, ECB President
Mario Draghi said today, as governments are increasingly prepared to favour
short-term objectives over price stability.
Draghi warned of a return to 1970s-style inflationary and price instability
if monetary policy were to become subject to political pressure.
His remarks come amid growing concerns over the destabilising effect of
Italy's budget negotiations with the EU, and in the wake of President Donald
Trump's recent attack on the Fed,
Here are key points from the speech at the National Bank of Belgium in
-- Outside the eurozone we see concerns being publicly expressed about
whether the central bank should pursue a normalization path in the face of
-- Credibility hinges on independence: central banks should not be subject
to fiscal or political dominance and should be free to choose the instruments
that are most appropriate to deliver their mandates. It is crucial that central
banks remain transparent and accountable.
-- Some observers now query whether the circumstances that justified
central bank independence still exist - and whether the grounds for delegating
monetary policy to independent authorities remain valid.
-- In the long term, monetary policy is not an important factor for the
distribution of resources within societies. Distribution is affected more by
low-frequency developments such as structural and institutional factors, or
fiscal policies such as tax regimes.
-- Evidence shows that the unconventional policies adopted by central banks
have eased financing conditions, boosted output and stabilized inflation.
--MNI Frankfurt Bureau; +49-69-720-146; email: email@example.com
--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com