Central banks face serious challenge from populism, warns Bank of England governor

Andrew Bailey, Governor of the Bank of England, has defended central bank independence against the threat of populism. He said central banks should be insulated from "short-term political pressures" but remain accountable to Parliament.

Speaking at the London School of Economics Trium Anniversary Conference, Bailey warned that populist political movements now pose a serious challenge to central bank independence.

Growing scepticism towards public institutions

Bailey said: "Across many countries we have witnessed growing scepticism towards public institutions generally. In the case of central banks, as I mentioned earlier, some critics argue they are too close to financial interests and that they stand in the way of popular preferences."

He added: "Any institution seen to get in the way becomes an unrepresentative elite standing between the people and their will, and thus an obstacle to popular sovereignty. This is a serious challenge."

Bailey did not specify any leaders, parties or countries.

Pressure on the Federal Reserve

His remarks come after the Bank's counterpart in the US, the Federal Reserve, has been thrust into the spotlight because of criticism from President Donald Trump for being too slow to cut interest rates in the country.

At the start of the year, the Fed's former chairman, Jerome Powell, said the central bank's independence was being undermined by the threat of criminal charges from Trump. The president has also attempted to oust Governor Lisa Cook.