Mess With Central-Bank Independence at Your Peril

10/19/2016 - Professor of History Alan M. Taylor at Bloomberg.

In most of the developed world, central banks are free to set monetary policy without the interference of those who depend on voters for their employment. That independence, though, is "not set in stone," as former Federal Reserve Chairman Alan Greenspan noted in his September 2007 memoirs. And there are worrying signs that, against the current backdrop of record-low interest rates, politicians are tempted to start meddling.

Here's what Alan M. Taylor, an economics professor at the University of California in Davis, told a conference organized by the Austrian central bank in Vienna last month:

"Society may now be asking more of central banks, and central banks will now try to find a way to serve those goals. Central banks can therefore expect to become less independent and more politicized going forward."

Read the full story at Bloomberg.