Moreover, by providing the liquidity (against collateral), the central bank is indicating its confidence in the solvency of the institutions that can be reinforced by this provision of information. 1  These issues are also covered in Stevens G (2008), “Liquidity and the Lender of Last Resort”, Seventh Annual Sir Leslie Melville Lecture, RBA Bulletin, May, pp 83–91.
I see three main reasons why central bank independence may move into the focus of public policy discussions: [9] First, inflation is expected to remain comparatively high over the next couple of years. The past decade has witnessed relatively low and stable inflation across advanced economies (Graph 1).