Why is the recession threatening central banks independence?I would really appreciate is someone could enlighten me. Ive been told the lower interest fall the more central banks have to work with their government counterparts. Why is this though? thanks alot in advance |
Central banks are never really independent. The US Federal Reserve has traditionally been more independent than other countries banks tho. Interest rates and money supply are the key tools they use. With the rates near zero they have effectively half ways neutered themselves. Since this leaves them weaker they need more cooperation from, or with, the government. Guess which of those two moves first? Politics is reading the latest poll numbers so there is a lot of pressure on the banks to "accommodate" which then helps lead to the next politically inspired bubble.
