Loss of central bank independence could lead to instability, IMF warns

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RegExp("[?&]notifications=1(&|#|$)");"desktop"===y&&i&&b.test(window.location.search)&&(i.checked=!0)};be("ybar-mod-notification",(function(e){var t={isUH3:"crunch"===e.getConfig().ytheme,notifContainer:document.getElementById("notification-container"),notifBadge:document.getElementById("notif-badge"),notifMenu:document.getElementById("ybarNotificationMenu"),notifMenuOpener:document.querySelector("#ybarNotificationMenu + label"),notifDropdown:document.getElementById("notifDropdownContainer"),tooltipContainer:document.querySelector(".".concat(Vn)),notifLabel:document.querySelector(".".concat($n))};t.notifDropdown&&ro(e,t)}))}()}};]]>Andrea ShalalTue, Jul 29, 2025, 2:03 PM 3 min readBy Andrea Shalal(Reuters) -The International Monetary Fund on Tuesday warned that any loss of central bank independence could undermine efforts to keep inflation expectations in check, potentially triggering a wave of financial, monetary and macroeconomic instability.The IMF hammered home that message in an update to its World Economic Outlook, released Tuesday, and in a separate interview with IMF chief economist Pierre-Olivier Gourinchas.In the update, the IMF said the current economic climate of prolonged trade tensions and uncertainty over evolving tariffs heightened the need for robust policies to safeguard financial stability and ensure central bank independence.In some cases, if tariff shocks resulted in disruptive movements in foreign exchange and risk premiums, it said it might be suitable for countries to implement temporary foreign exchange interventions or capital flow management measures."Crucially, the ambiguous and volatile landscape also requires clear and consistent messaging from central banks and the protection of central bank independence, not only in legal terms, but also in practice," the global lender said.U.S. President Donald Trump has repeatedly exhorted the U.S. Federal Reserve to cut interest rates while questioning the leadership and continued tenure of Chair Jerome Powell, whose term at the Fed's helm is due to end in May 2026.Those statements have unsettled markets, worried about a loss of the longstanding principle of Fed independence.The two men sparred over cost overruns on a Fed renovation project on Friday, as Trump repeated his call for lower rates.Asked about Trump's efforts to push Powell out of office, Gourinchas underscored the importance of maintaining central bank independence to keep inflation expectations anchored."This is really a core plank for macroeconomic stability overall. That's one of the hard learned lessons of the last 40 years," the IMF chief economist told Reuters in an interview, without mentioning the Fed specifically."We have a very, very clear message on this - it's very important to keep central bank independence and to implement it," he said.Central bank independence was foundational to macroeconomic frameworks in both advanced and emerging economies, he said.Despite the recent era of large price increases from 2021 to 2024, markets and consumers maintained confidence in policymakers' determination to keep inflation in check over the medium term, averting a broad de-anchoring of inflation expectations.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,362.90 -7.96 (-0.12%)Dow 3044,461.28 -171.71 (-0.38%)Nasdaq21,129.67 +31.38 (+0.15%)Russell 20002,232.40 -10.57 (-0.47%)VIX15.48 -0.50 (-3.13%)Gold3,327.40 -53.80 (-1.59%)PortfolioSign in to access your portfolioSign inTop gainersWING Wingstop Inc. 368.26 +77.96 (+26.85%)FTAI FTAI Aviation Ltd. 144.46 +30.32 (+26.56%)PIII P3 Health Partners Inc. 7.30 +1.50 (+25.86%)GNRC Generac Holdings Inc. 181.00 +29.68 (+19.61%)TER Teradyne, Inc. 107.65 +17.10 (+18.88%)Top losersNEGG Newegg Commerce, Inc. 44.97 -11.22 (-19.97%)CAR Avis Budget Group, Inc. 172.46 -31.42 (-15.41%)SLGN Silgan Holdings Inc. 47.30 -8.50 (-15.23%)CHKP Check Point Software Technologies Ltd. 186.67 -31.66 (-14.50%)ENTG Entegris, Inc. 79.34 -13.41 (-14.46%)Most activeSOFI SoFi Technologies, Inc. 21.87 -0.53 (-2.37%)NVDA NVIDIA Corporation 179.27 +3.76 (+2.14%)LCID Lucid Group, Inc. 2.5000 -0.0600 (-2.34%)TSLA Tesla, Inc. 319.04 -2.16 (-0.67%)F Ford Motor Company 10.87 -0.21 (-1.90%)Earnings eventsTrending tickersWING Wingstop Inc. 368.26 +77.96 (+26.85%)FCX Freeport-McMoRan Inc. 39.14 -4.09 (-9.46%)^GSPC S&P 500 6,362.90 -7.96 (-0.12%)MSFT Microsoft Corporation 513.24 +0.67 (+0.13%)PTON Peloton Interactive, Inc. 7.34 +1.16 (+18.77%)Top economic events