Andrew Bailey: Populism threatens central bank independence

Bank of England Governor Andrew Bailey has warned that the rise of populist politicians presents a serious challenge to the independence of central banks globally. Speaking at a conference at the London School of Economics, Bailey stated that central bankers must be prepared to explain their decisions to the public or risk being attacked as an "unrepresentative elite." He argued that populist parties often claim to represent the "authentic will of the people," positioning any institution that obstructs them as an "unrepresentative elite" and an obstacle to popular sovereignty. Bailey emphasized that institutions exercising significant authority should expect scrutiny, which he views as a sign of democratic health. He referenced historical figures and noted that central banks, like courts and universities, derive legitimacy from democratic delegation and public trust. The Bank of England was made independent in 1997, transferring interest rate decisions to a nine-member monetary policy committee chaired by the governor. Bailey's remarks come amid a backdrop of populist attacks on central banks, including US President Donald Trump's criticisms of former Federal Reserve Chair Jay Powell and actions by leaders in Turkey, Hungary, and India. Bailey will appear before MPs on the cross-party Treasury select committee next week to further explain his views.