Central banks’ big challenge to safeguard independence

Speaking at a think-tank event in Berlin, the President of the European Central Bank once again defended its monetary policy actions that saw cutting rates to record low and buying of fixed income assets at an unprecedented pace, in addition to other measures such as long-term refinancing operation. In recent days the central bank came under fire over its monetary policies as they are being accused of ripping banks’ profitability, widening the deficit of the pension funds and widening the gap between the rich and the poor.

Mr. Draghi denied such allegations and trumpeted the success of the bank’s monetary policies in fighting deflation. He said that the measures taken by the bank have succeeded in removing the threats of imminent deflation. Such comments, however, should be taken with a pinch of salt as inflation is above zero but at just 0.4 percent, at much lower levels from ECB’s 2 percent target. Mr. Draghi said, “We have every reason to believe that, with the impetus provided by our recent measures, monetary policy is working as expected: by boosting consumption and investment and creating jobs, which is always socially progressive”.

While it is an indication that the ECB won’t by shying away from its monetary easing, these comments surely won’t wipe away the criticism the bank is facing.