The former is a good illustration of the difficulty for independent bodies to deal with multiple policy mandates and/or the distributional effects of policy decisions, which involve choices that are normally expected in the political process but not easy to tackle by nonelected officials. This was particularly exposed during the GFC, given the perception of unfairness in the distribution of the burden of the crisis and the actions to contain it. Even success of independent central banking has come at a price. Controlling inflation has made the latter less of a concern to citizens and politicians. The effectiveness of central banks in securing macro and financial stability in the post-crisis years may have also removed responsibility from other actors and may have encouraged markets to rely too much on central banks as risk managers. The current wave of political populism is a further source of risks. Threats to central bank independence usually do not come from the public but from political leaders that resent distributed governance as well as checks and balances. In the last few months, we have witnessed a number of attacks on central bankers for coming in the way of ambitious populist agendas. Independence and credibility This is a good reminder that independence of central banks cannot be taken for granted. No matter how deeply it is ingrained in the law, independence can always be taken away or significantly undermined, de facto or de jure.
Philipp Hildebrand: Financial market turbulence and the economic outlook Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Handels- und Industrieverein des Kantons Bern, BurgdorfEmmental section, Burgdorf, 25 October 2007. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is very difficult to assess how the shifts in the credit markets triggered by the US sub-prime mortgage market will impact on the real economy. As a result, the uncertainties with regard to the economic outlook have increased considerably. The evaluation of structured credit products, some of them very complex, is based on models. Because of the difficulties this evaluation poses, the market for such products gradually disappeared. The uncertainty as to the degree of exposure of individual banks in the structured credit market led to illiquidity in the unsecured interbank market. Central banks around the world have reacted to this unusual situation with injections of liquidity. An adequate supply of liquidity to the economy is essential for our economic system to function. A favourable aspect of the situation was the fact that the credit market turbulence occurred at a time when the global economy and the Swiss economy were both in good shape. BIS Review 121/2007  1