Question

Why do most economists believe that it is important for a country’s central bank be independent of the rest of the country’s central government? What was the most recent US Federal Reserve's policy-making Federal Open Market Committee (FOMC) report?

Answer 1

Answer:

For economists is important to avoid political interferance in the monetary policy. Populist governments often use the creation of money to justify their political programs, causing inflation and distortions on the market.

In the last report of FOMC is highlighted the behaviour of market labour and the lower expectations of inflation.

Explanation:

There are two tools commonly used in political economy to finance government programs: taxation and paper currency print. When the central bank is not independent, the government has an incentive to print money to fund their programs, causing inflation. In economic science has been demonstrated that inflation is always caused by monetary phenomena.