BIS defends the independence of central banks

The Bank for International Settlements (BIS) reiterated on Sunday the importance of central bank independence, at a time when Donald Trump's wave of criticism of the chairman of the US Federal Reserve (Fed) is raising concerns.

In its annual report published Sunday, the BIS – an institution considered the central bank of central banks – reviewed the major challenges likely to affect monetary policies, including trade tensions with tariffs and high levels of public debt in various countries.

But the Basel, Switzerland-based institution has also repeatedly raised the issue of the independence of central banks, which must be able to act without "political interference" to carry out their mission, the report said.

At a conference ahead of the report, its president, Agustin Carstens, declined to comment on the US president's harsh criticism of Jerome Powell, the chairman of the US central bank, but stressed the importance of central bank independence;

A central bank is "an institution that must be able to do what it deems necessary to preserve financial stability and the value of its national currency" in order to maintain "the conditions for an economy to function in a healthy manner," he insisted.

And this is true even if "what needs to be done does not correspond to what a government would like to see," he argued.

In a message posted Tuesday on his social network, Truth, the American president called Mr. Powell "stupid" and "stubborn." For several months, Donald Trump, who would like to see interest rates lower, has criticized him for pursuing an overly restrictive monetary policy. Mr. Powell, for his part, defends the idea that the Fed can still wait, particularly to determine the effects of customs duties on inflation and economic activity.

On Thursday, Mr. Trump's renewed criticism of Mr. Powell sent the dollar lower. The US president discussed a possible successor, raising concerns in markets about the independence of the world's most powerful central bank.

According to the BIS, central banks are facing a complex economic situation, which requires them to make a delicate decision to decide whether to continue lowering their interest rates or, on the contrary, to put them on hold.

In its annual report, the BIS stressed that "this trade-off is particularly difficult" given the lack of clarity "regarding the effects of the tariffs implemented so far" and "the uncertainty regarding potential future measures."