One of the tasks of central banks is to demonstrate that they are “appropriate institutions” in democratic societies, the vice chairman of the U.S. central bank said in remarks Thursday, supporting the continued independence of the institution he represents.
During a question-and-answer session at a conference in St. Louis, Federal Reserve Board Vice Chairman for Supervision Randal H. Quarles noted that central banks are given – “and for good reason” – significant amounts of independence in how they function.
“We all know the historical reasons for what that is, and for how the outcomes for central banking – particularly in monetary policy but also in financial regulation – can turn out to be quite bad if they are too subject to the political pressures of the moment,” Quarles told the audience at the Community Banking in the 21st Century conference during a Q&A session following his formal remarks.
But he also stressed the “very strong obligation” that comes with that independence for accountability. “Transparency about how we operate is an extremely important part about how we do that,” Quarles said. He added that, over the next decade, it is important for central bankers to demonstrate why that continued independence is appropriate, “because we will hold ourselves accountable, and being transparent about our regulation is (an important part of) how we do that.”