Adriana D Kugler: Central bank independence and the conduct of monetary policy

Thank you for your generous introduction, Marcela, and thank you for the opportunity to be here and speak to you today. I believe I am the first central banker from the U.S. to address this annual meeting, but I know, and am proud to say, that I am the first who is also Latin American. And, of course, I have been part of the LACEA Executive Committee and I have presented papers at many LACEA conferences over the years, so it is a pleasure to be back here among many colleagues.

When the United States suffered very high inflation beginning in 2021, it was a new and unfamiliar experience for many too young to recall the last time this occurred in the 1970s and 1980s. Of course, very high inflation is not such a distant memory for people from Latin America and the Caribbean, and that includes me. Growing up in Colombia, I vividly recall the daily challenges of trying to plan and live with sustained double-digit inflation, and I especially remember the pain it imposed on disadvantaged people.

Gaining control over inflation requires a commitment by society to accept the tradeoffs and sacrifices often needed, and it also requires deliberate and principled decision making by central banks. Central bankers must both formulate their best judgment of the correct policies that will achieve a desired level of inflation and follow through by executing and maintaining those policies. It has been widely recognized - and is a finding of economic research - that central bank independence is fundamental to achieving good policy and good economic outcomes. It is not sufficient by itself to achieve those goals, but, over time, it is almost always necessary.