Origins and foundations of central bank independence

Presentation by Mr Agustín Carstens, General Manager of the BIS, prepared for an event hosted by the Bank of Spain, "Central bank independence in the face of present and future challenges", Madrid, 17 January 2025.

Central bank independence is a fundamental component of the social arrangements aimed at preserving trust in the value of money and keeping inflation under control. A comprehensive overview of the widespread acceptance of central bank independence and its historical evolution highlights its multifaceted nature, including its social, political, legal, and economic dimensions. It also helps outline six essential principles underpinning statutes for central bank autonomy: mandates, policy tools, accountability, budget sufficiency, governance and the complex relationship with other government entities. Looking ahead, there is a need for continuous reinforcement of independence to enhance the legitimacy and effectiveness of central banks in achieving their objectives. In doing so, care should be taken not to overburden central banks' mandates.