Thomas Jordan: Current challenges to central banks' independence

Text of the Annual O John Olcay Lecture on Ethics and Economics by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Peterson Institute, Washington DC, 11 October 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and gentlemen

I am very grateful for the opportunity to give this year's O. John Olcay Lecture on Ethics and Economics. John Olcay was a remarkable person and a true gentleman. He had an exceptionally thorough understanding of politics, economics and markets, and was always willing and eager to discuss a broad range of topics. John was also a friend of mine, and a steadfast supporter of the Swiss National Bank. It is a great honour and a pleasure for me to give this lecture in his memory today.

I was scheduled to give this lecture in 2020, but this had to be postponed because of the pandemic. Just two years ago, many central banks wanted inflation to nudge up closer to their targets, and there were some calls for central banks to directly finance fiscal expenditures. Since then, the political and economic context has changed dramatically. Inflation is far too high almost everywhere, and central banks are raising their policy interest rates at a time when stocks of government debt are large. In some places, central bank independence is being publicly called into question.

Such explicit pressure to curb central bank independence is a fairly recent phenomenon. It was not prevalent in recent decades; on the contrary, there was a firm consensus among economists, politicians and the general public on the need for central bank independence. This consensus was based not only on theory, but also on practical experience. Price stability can only be achieved with an independent monetary policy, i.e. without political pressure on the central bank.