Central bank independence - a path less clear

Remarks by Mr Stephen G Cecchetti, Economic Adviser and Head of Monetary and Economic Department of the BIS, prepared for the International Conference held to commemorate the 20th anniversary of the autonomy of the Bank of Mexico, Mexico City, 14 October 2013.

It is always a pleasure to return to Mexico City; especially so on this important occasion. Anniversaries are always a good time to reflect on the past in an effort to learn and to plan for the future. And, since this is an anniversary of autonomy, my task is to look at the history and the future of central bank independence. Before I start, let me be clear: I believe that central bank independence has served us well in the past, and will continue to serve us well in the future.

Of central bankers and mountaineers

As I come from a Swiss-based institution, an alpine analogy seems apt. Central bankers today are a bit like winter mountaineers who, after a lengthy walk through benign and predictable terrain, get hit by an avalanche. The survivors are now regrouping, trying to figure out how to proceed safely.

I grant that, being prudent, most central bankers would never go hiking on an avalanche-prone snowfield, but I'm sure you see the point. The question today is whether the techniques and institutional arrangements that kept us on the right path during the pre-crisis decades are still good enough. Or do we need to make adjustments for the rougher terrain ahead?