What happened
The Bank of England’s chief economist, Pill, has said that the biggest threat to the central bank’s independence is the government pushing it to finance vast fiscal deficits.
He pointed out that slowing economic growth and a series of supply shocks have widened fiscal deficits and raised public debt levels worldwide. If the central bank were used to fund these deficits, market trust in its independence could be undermined.
Why it matters
Central bank independence is essential for credible monetary policy and inflation control. If the Bank of England is perceived as a financing arm of the government, that credibility could be damaged.
This warning comes at a time when weaker growth and repeated supply disruptions may make governments more inclined to seek central bank support for their spending plans.
Key facts
Pill, the Bank of England's chief economist, made the statement.
He identified government pressure to finance large fiscal deficits as the main risk to central bank independence.
He cited slowing growth and supply shocks as reasons behind rising global public debt and wider fiscal deficits.
What to watch next
Whether governments respond to economic slowdowns by increasing pressure on central banks to help finance deficits.
How market participants react to any signs that monetary policy might become subordinate to fiscal needs.