Factbox-How independence came to be standard for global central banks

Core Viewpoint - The Trump administration's criminal investigation into the head of the Federal Reserve raises concerns about the independence of the U.S. central bank, which is crucial for economic stability [1] Group 1: Historical Context of Central Bank Independence - The Federal Reserve gained operational independence in 1951, following inflation issues that highlighted the limitations of previous monetary policies [3] - Political pressure, notably from former President Nixon, contributed to inflation in the 1970s, emphasizing the need for central bank independence [4] - By the end of the 20th century, 80-90% of the world's central banks had operational independence, as noted by the Bank of England [5] Group 2: Impact of Independence on Inflation - The last 30 years of low inflation have been attributed to various factors, including central bank independence, which has been linked to lower inflation levels and volatility [6] - In the UK, the uncertainty regarding inflation decreased by a factor of four after the Bank of England became independent in 1997, compared to the previous two decades [7] Group 3: Challenges to Central Bank Independence - The global financial crisis of 2007-09 tested the support for independent central banking, as it was associated with failures by central banks and regulators in managing banking system risks [8]