In financial markets, particularly in an evolving jurisdiction facing numerous challenges in uncertain times, the central banker is expected to embody credibility – credibility par excellence. A memorable 1963 event in the UK, even when the concept of independent central banks was unknown, crystallizes the point I am making.
That was the year when banks in London were treated to a display of the Bank of England’s political muscle. The Bank’s governor Lord Cromer had decisively forced Britain’s new Prime Minister Harold Wilson to throw away half of his election promises and slash government spending.