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Central bank independence
Doctrine of central bank freedom from political influence From Wikipedia, the free encyclopedia
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Central bank independence refers to the degree of autonomy and freedom a central bank has in conducting its monetary policy and managing the financial system and inflation targeting. The purpose of central bank independence is to maintain price stability, enhance the effectiveness of monetary policy, and ensure the stability of the financial system. Independent central banks are better able to carry out these mandates.[citation needed] It is a key aspect of modern central banking, and has its roots in the recognition that monetary policy decisions should be based on the best interests of the economy as a whole, rather than being influenced by short-term political considerations.[4]
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The concept of central bank independence emerged in the 1920s and was broadly approved by the conclusions of the Brussels International Financial Conference (1920).[5][6] Since the 1980s, there has been a substantial increase in central bank independence worldwide.[6]
Central bank independence can be classified in various ways. One common classification is based on the extent of the central bank's autonomy, which can be either formal or actual. Formal independence refers to the legal provisions that guarantee the central bank's autonomy, such as its mandate, its organisational structure, and the procedures for appointing its leaders. Actual independence refers to the practical independence that the central bank enjoys in practice, taking into account factors such as its political and institutional environment, its relationship with the government, and the level of transparency and accountability in its operations.[7]
Another common classification of central bank independence is based on the extent to which the central bank is free from government control. This can be either formal or actual, and ranges from complete independence to full government control, with several intermediate levels in between.[8] The People's Bank of China is an example of a central bank subject to Chinese Communist Party control (Unified power).[9]
On 15 July 2025, Donald Trump reportedly penned a letter to dismiss Powell as Fed Chair.[10] However, Trump later denied those reports to reporters at the White House. [11]
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