P/F/233. Independence of central banks: issues of concern for the government

The paper seeks to understand why some governments are still reluctant to enhance their Central Banks' independence (CBI). Central banks help to implement the monetary policy that is used by governments to ensure price stability and low inflation rates. The paper presents evidence that a higher degree of CBI leads to a greater price stability. The situation in the UK is described where the central bank implements government policy, although it is independent from the government by law. The examples of the relationships between governments and their central banks in other countries are given to show the reasons for the governments' concern about the level of CBI. The main areas of concern are outlined.