Upholding central bank independence in challenging times

Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at the 28th meeting of Francophone Central Bank Governors in Phnom Penh, Cambodia. She emphasized the importance of balancing independence and accountability in central banking.

Lagarde highlighted the historical context, noting that central bank independence is crucial for controlling inflation and maintaining public trust. She referenced the ECB’s experiences during crises, including the sovereign debt crisis and 2022 inflation surge, demonstrating how credibility was built through effective action.

She explained that the current environment is more demanding, with frequent supply shocks, fiscal pressures, and declining trust in institutions. To safeguard independence, she outlined three conditions: clear mandates prioritizing price stability, transparent communication, and maintaining fiscal responsibility and financial resilience.

Lagarde concluded by stressing that trust, once lost, is difficult to regain. She emphasized that preserving credibility is essential for the stability of money and the economy.