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How crucial is central bank independence?

President Trump’s attempt to fire Lisa Cook from the Federal Reserve Board of Governors has revived a broader debate about the value of central bank independence. The strength of the evidence in favour of greater central bank autonomy lowering inflation has often been overstated, and even complete independence offers no guarantee of low inflation in future. But sustained political intrusion into monetary policy would come at a cost, even if markets are willing to overlook it in the short term.

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