"Central bank independence is a key element of trust"

On the first day of the 11th Gaidar Forum, Russian and foreign experts held a discussion "Central Bank Independence: the Past or the Future?" on the role of the central banks in ensuring macroeconomic stability and in the economic development of states.

Central banks of the leading countries have become a key tool for their economies stabilization during the 2008–2009 financial crisis. Accordingly, over the past 10 years, the tools of the monetary authorities' policy have expanded significantly and include programs of "quantitative easing", macroprudential supervision, and financial stability ensuring. Over this period, the Central Bank of Russia made the transition to a new monetary policy regime – inflation targeting, and assumed the role of a mega-regulator of the Russian financial market.

First Deputy Governor of the Central Bank of Russia Ksenia Yudaeva spoke about the results of this policy, "Russia and Brazil have switched to inflation targeting. As a result, Brazil experienced a major breakthrough in terms of building confidence in this policy, while inflation in Russia decreased, which makes it possible to lower interest rates. Medium-term interest rates have declined in both Russia and Brazil quite significantly."

A representative of the Central Bank suggested paying special attention to enhancing the role of macroprudential regulation, "After the crisis, it became clear that if there is a relationship within the financial sector, if some financial institutions affect others, it is important to see risks that are not visible within individual financial institutions. For example, last year we introduced a debt burden indicator (DBI) as a tool for retail lending risks regulating."

"I talked a lot to the banks that have their own excellent risk analysis systems, very developed, using big data and artificial intelligence. After a bank approves a loan, the borrower may take other loans elsewhere and create risks. This means that when borrowers take loans from different banks, each individual bank does not evaluate the risks for the entire system. The risk is underestimated because it is distributed among banks and it makes sense to control this risk as a whole in the system," said Ksenia Yudaeva.

At the same time, many issues remain unresolved: areas of responsibility of the monetary authorities, zero and even negative key rates, the risk of "bubbles" formation in the stock markets, and a boom in the corporate bond market. The leading economies of the world have not yet returned to sustainable economic growth, and this is an indicator of a serious problem.

"Monetary and economic policies have changed dramatically since the big financial crisis of 2008. I think the difference is that emphasis is placed on short-term goals. To separate monetary and fiscal policies is unfair. Both are an economic policy, it has both short-term, and long-term goals and consequences which connect the past with the future. These goals go hand in hand, the differences between them get blurred. This difference stems from political tools used by authorities," said the Chairman of JP Morgan Chase International Jacob A. Frenkel, who had been leading the Bank of Israel from 1991 to 2000.

According to Jacob A. Frenkel, central banks should have long-term horizons. "We are approaching one of the foundations of the political economy of government. Politicians are good people, but they have electoral cycles, they want to be re-elected, they must meet the aspirations of the electorate. We all have short-term goals, but long-term goals should not be forgotten. Central banks must monitor the implementation of long-term goals, and for this they must be autonomous. I do not say "independent", but they need autonomy in the implementation and application of long-term policy instruments."

The initiative of central banks is a necessary measure in crisis conditions, believes Charles W. Calomiris, the Henry Kaufman Professor of Financial Institutions at Columbia Business School of Columbia University. "I think the crisis has brought about dramatic changes in the work of central banks. The negative consequences had three aspects. Firstly, urgent action was required, and parliaments are not very strong in this. Secondly, we have faced a lack of consensus in parliaments regarding finance. Thirdly, the traditional instruments of monetary policy in 2008-2010 were perceived as insufficiently efficient. Central banks were forced to move to fiscal realm, to deal with issues of budget, spending, and taxation. I was in Russia in 2015, and then many expected that there would be a crisis here. Why didn’t it happen? The central bank farsightedly decided that it was necessary to raise the interest rate, and it was not easy. It was a bold move."

"Central banks really intervened in fiscal policy through expansion of balances, through interest rates to some extent. This happened precisely as a result of the crisis of 2008–2009. But I emphasize that this was a quick reaction of the monetary authorities. If this had not been done, avoiding debts might have created more serious and deeper consequences than they really were. On the other hand, did central banks lose their legitimacy as institutions independent of the executive branch? In my opinion, no. If short-term intervention created the necessary financial stability, it only raised their legitimacy. Legitimacy rests not just on the law, it rests on the fact that there is public recognition that the Central Bank is doing everything right," said Oleg Vyugin, Chairman of the Supervisory Board of the Moscow Exchange.

Central banks need to protect the role they play today, noted Kenneth Rogoff, professor at Harvard University, "If you take it away, they may lose certain tools and stop working efficiently."

The speakers came to the conclusion that the autonomy of central banks can serve as an efficient way out of crisis situations, however, in the case of the long-term goals formation, it is important to determine their role in monetary policy and consolidate it legislatively.


The Gaidar Forum is held at the RANEPA under the auspices of the Government of the Russian Federation and in 11 years it has become one of the most respected expert venues, which traditionally sets the vector for public and scientific discussion at the beginning of each year. The organizers of the 11th Gaidar Forum are the Russian Presidential Academy of National Economy and Public Administration, the Gaidar Institute for Economic Policy, and the Association of Innovative Regions of Russia.

The title partners of the Gaidar Forum are Gazprom PJSC and Gazprombank JSC. The strategic partners are Coca-Cola, Mastercard, Russian Railways, Pharmstandard group of companies, Johnson & Johnson, Sanofi, Novartis group of companies, MSD, AKIG group of companies, EF Education First. Partners are Prosveshchenie group of companies, EY, Huawei, RVC JSC, Russian Agricultural Bank JSC.

The title information partners of the Gaidar Forum are the Russia-24 TV channel, TASS, RBC, Business FM. The strategic information partners are Kommersant Publishing House, Interfax, Rossiyskaya Gazeta, Invest Foresight magazine, Federal Press Agency. The main information partners are Anews.com, Gazeta.Ru, Lenta.Ru, News.ru, Profile. International partners are RT, ThomsonReuters, Sputnik, EFE, Cision, Pan Pacific Agency. Information partners are Snob media project, AEI PRIME, RNS, Expert magazine, Parlamentskaya Gazeta, Polit.ru, Ekho Moskvy radio station, PRO Business TV channel, FINAM.RU information and analytical agency, Davydov.Index holding, Strategiya magazine, Ekonomika i Zhizn newspaper, Econs portal, Gosudarstvennaya Sluzhba magazine, TV BRICS.