To maintain price stability and financial sector safety, central banks must operate free from short-term political pressures.
The Three Pillars of Central Bank Autonomy
[Goal Independence] --------> The statutory right to define long-term inflation targets
[Instrument Independence] --> Freedom to adjust interest rates and reserve ratios without veto
[Financial Independence] ---> Complete separation from state treasury budget allocations
Granting institutional independence to the central bank ensures that interest rate choices and macroprudential buffer settings are guided by objective data indicators rather than political election cycles, supporting long-term economic stability