The broad turn towards central bank independence can be traced back to the 1970s and 1980s. Many countries were experiencing high inflation. Therefore, attention focused on overcoming 'time inconsistency', a problem inherent to monetary policy. This is the risk that policymakers, for political reasons, will aim for short-term gains through expansionary policies, since their costs will not be visible immediately. Proposals to enhance central bank independence emerged as a viable device to face these challenges.
The case for independence has strong underpinnings, but there has been growing doubt over its merits. This was initially a consequence of the monetary policy response to the 2008 financial crisis, particularly in the largest advanced economies. First, amid low inflation, some argued central bank independence was no longer justified.