Central Bank Independence
Central bank independence is the extent to which a country's central bank operates free from direct political control in setting monetary policy, including decisions on policy instruments and communications. The concept is often linked to the design of institutional rules that protect the central bank from short-term political pressure.
Example: In a country with constitutional protections for governors and an inflation-targeting mandate, the central bank can adjust policy rates without direct orders from the finance ministry and issue regular policy statements.
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