Independence of central banks is ‘paramount’, warns IMF | EUROtoday

The independence of central banks is “paramount” for international financial stability and development, the International Monetary Fund (IMF) has warned.

It comes per week after Federal Reserve chair Jerome Powell stated he was the topic of an “unprecedented” US justice division legal investigation over his testimony in regards to the financial institution’s constructing renovations.

He stated he believed this was as a consequence of Donald Trump’s anger over the Fed not slicing rates of interest, however Trump stated he didn’t know in regards to the investigation.

The IMF’s feedback got here in its newest world financial outlook, the place it described the worldwide financial system as “steady”, with headwinds from shifting commerce insurance policies offset by surging tech and AI funding.

Overall, the financial watchdog stated international development was projected to stay “resilient” at 3.3% this yr – a rise from its earlier forecast of three.1% – and three.2% in 2027.

The IMF estimates the UK grew by 1.4% in 2025, barely up from its earlier projection of 1.3%. Its forecast for this yr stays unchanged at 1.3% and it predicts 1.5% development in 2027.

Global inflation is predicted to fall from an estimated 4.1% in 2025 to three.8% in 2026 and additional to three.4% the next yr.

In the UK, it stated inflation is predicted to return to the goal 2% by the tip of the yr, as a weakening labour market continues to maintain wage development down.

The IMF stated dangers to the worldwide outlook “remain tilted to the downside”, warning that if expectations about AI development change into overly optimistic an abrupt market correction might be triggered, and of a possible flare-up in commerce tensions.

On the flip facet, it stated AI funding may remodel into sustainable development, and exercise might be additional lifted by a sustained easing of commerce tensions.

In October, the IMF stated up to now there had been a “muted response” to the wave of tariffs imposed on imports to the US final yr.

In its newest replace it stated commerce tensions had continued to abate since October, and whereas tariffs and uncertainty have been anticipated to proceed having an influence, the impact on development was anticipated to fade over the subsequent two years.

But it warned that central financial institution independence was “paramount for macroeconomic stability and economic growth”.

“Preserving the independence of central banks, both legal and operational, remains critical for avoiding the risk of fiscal dominance, anchoring inflation expectations, and enabling them to achieve their mandates,” it stated.

Powell’s disclosure that federal prosecutors had opened a legal investigation into him marked a rare second in his long-running spat with the US president.

Actions over the Fed constructing have been “pretexts”, he stated. “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president.”

It prompted central banks the world over declared “full solidarity” with the Powell, whereas three former heads of the financial institution strongly criticised the investigation.