Martin Flodén in Dagens industri: ”Central bank independence must be preserved”
Donald Trump’s attempts to regulate the U.S. central bank raise important questions about the role and responsibilities of central banks – also in Sweden. To safeguard independence, the political mandate must be narrow and clearly defined, writes Martin Flodén, Professor of Economics at Stockholm University, in Dagens industri.
Martin Flodén, Professor of Economics at Stockholm University.
”The boundaries between monetary policy, crisis management and fiscal policy have become blurred”
In an op-ed in Swedish financial newspaper Dagens industri, Martin Flodén argues that political pressure on the U.S. central bank, the Federal Reserve, brings into focus the core idea for independent central banks: protecting monetary policy from short-term political interests. ”Throughout history, we have repeatedly seen the problems that arise when monetary policy prioritizes short-term stimulus over long-term price stability.”
At the same time, central banks have had to deploy an increasingly broad set of tools since the 2008 global financial crisis and, more recently, the pandemic – measures that extend beyond traditional monetary policy. ”Central banks have provided extensive and prolonged liquidity support and purchased large volumes of financial assets. As a result, the boundaries between monetary policy, crisis management and fiscal policy have become blurred,” Flodén writes.
Flodén emphasizes that central banks still need a relatively wide scope for action, but also that the political mandate must remain limited to price stability and basic financial infrastructure. Assigning additional responsibilities to the Riksbank risks, in his view, weakening support for central bank independence where it matters most. ”The Riksbank needs to exercise its powers with restraint. It should avoid pushing the limits of its mandate, and beyond strictly monetary policy decisions, it should seek cooperation and consensus with other authorities.”
Last updated: 2026-01-22
Source: Department of Economics