The quiet erosion of central bank independence
Join us for the Fifth Annual Charles Goodhart Lecture, which will be delivered by Isabel Schnabel from the European Central Bank.
Central bank independence has come under increasing pressure in recent years. While direct political interference has attracted most of the attention, more serious and enduring threats to central bank independence are gradually evolving. Rising sovereign debt is quietly eroding the space within which monetary policy can operate effectively, increasing the risk of fiscal dominance. Simultaneously, the renewed momentum for financial deregulation risks creating the conditions for financial dominance – the implicit prioritisation of financial stability over price stability. Preserving independence in this environment requires sustainable public finances, a resilient financial system and central banks that adhere firmly to their mandates. The alternative – implying independence de jure but not de facto – would lead to higher inflation, lower growth and financial instability, thereby undermining central banks’ core promise to ensure macroeconomic stability.
Meet our speaker and chair
Isabel Schnabel has been a Member of the Executive Board of the European Central Bank (ECB) since 2020 where she is responsible for Market Operations, Research and Statistics. She is currently on leave from the University of Bonn, where she has been Professor of Financial Economics since 2015. From 2014 to 2019 she served as a member of the German Council of Economic Experts. She also served as Co-Chair of the Franco-German Council of Economic Experts and Vice Chair of the Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB). Isabel Schnabel studied economics at the Universities of Mannheim, Paris (Sorbonne) and Berkeley. She holds a PhD in Economics from the University of Mannheim. Her research focuses on financial stability, banking regulation, central banking, international capital flows and economic history.
Martin Oehmke is Professor of Finance at LSE. Martin received his PhD in Economics from Princeton in 2009. Before joining LSE in 2015, he was the Roger F. Murray Associate Professor of Finance at Columbia Business School. He serves on the advisory scientific committee of the European Systemic Risk Board. His research interests are sustainable finance, financial regulation and corporate finance and banking.
More about this event
The Lecture Series in Honour of Charles Goodhart was set up in 2022 to honour Charles Goodhart, eminent economist and Emeritus Professor at LSE. Charles was instrumental in the founding of the Financial Markets Group more than 35 years ago. Charles Goodhart was appointed to the Norman Sosnow Chair of Banking and Finance at LSE in 1985, until his retirement in 2002 when he became Emeritus Professor of Banking and Finance. He was elected a Fellow of the British Academy in 1990, and awarded the CBE in 1997, for services to monetary economics. During 1986, he helped to establish the Financial Markets Group at LSE. For the previous 17 years he served as a monetary economist at the Bank of England, becoming a Chief Adviser in 1980. Following his advice on overcoming the financial crisis in Hong Kong in 1983, he subsequently served on the HK Exchange Fund Advisory Committee until 1997. The same year he was appointed one of the four independent outside members of the newly-formed Bank of England Monetary Policy Committee. He became an economic consultant to Morgan Stanley in 2009, until he resigned, at the age of 80, in 2016. Charles has written widely on matters relating to monetary policy, especially central banking, and macro-economics. He is the author of Goodhart's Law "that any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes."
The Financial Markets Group (@FMG_LSE) is a leading centre for research into financial markets. Research at the FMG examines how stable and efficient the financial system is, how it supports the real economy, and what policy measures can generate improvements in these dimensions.
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