Central Banks Stick to Inflation Fight, Resisting Pressure for Stimulus

TOKYO -- Most of the world's big central banks are holding to cautious monetary policies despite political pressure for faster economic growth, economists in Tokyo, New York, London, and Frankfurt said.

"The balance of power is shifting to monetary authorities," said Jesper Koll, chief economist at S.G. Warburg Securities (Japan) Inc. "The central banks' anti-inflation bias will put a floor under global interest rates."

However, economists warn that coming elections could increase the heat on the banks.

Politicians Impatient

Mr. Koll and other economists said that while interest rates were facing downward pressure, they were not likely to come down as fast or as far as most political leaders want.

The policies of the four big central banks, with the exception of the Bank of England, are largely beyond the official reach of other government branches.

That does not stop politicians from engaging in everything from public haranguing to behind-the-scenes arm-twisting in an effort to make central bankers comply with their wishes.

Pressures Are Varied

In the United States, for example, White House economist Michael Boskin recently urged the Fed to bring money-supply growth up to the middle of the central bank's target range, saying interest rates might have to be cut to achieve this.

German economists said recent attempts to interfere with Bundesbank policy have failed. The Bundesbank raised rates in August after the economic minister pleaded with it not to.

"In Germany there is a basic consensus that monetary stability is the most important goal," said Commerzbank economist Peter Pietsch in Frankfurt. "There is no serious interference with Bundesbank efforts to achieve that."

Mieno Gaining Leeway

Perhaps no current central banker has fought more for independence than Yasushi Mieno, governor of the Bank of Japan.

Mr. Mieno weakened the influence of the Ministry of Finance over central bank policy and, in view of economists, shifted the bank's focus to domestic from international concerns. "Mieno is trying to turn the BOJ into a Bundesbank," said Russell Jones, chief economist at UBS Phillips & Drew International Ltd. in Tokyo.

In contrast, the Bank of England is dictated to and bullied by governments, London analysts said. But in recent years, a lobby has grown for its independence. It is often publicly vocal about monetary policy, and the charisma of the governor, now Robin Leigh-Pamberton, is of vital importance.

Weak Economies a Factor

Economists said central bank influence has been helped by economic ills in the United States, Germany, and England. These have hit the bankers' confidence in governments' ability to pursue their own policies.

But pressure on central bankers may intensify, especially as elections near in Britain and the United States.

Prime Minister John Major's government is thought to be receptive to giving the Bank of England more autonomy but may be unable to resist cutting interest rates before general elections due by next year. "If the Treasury issues a directive, the Bank must follow it," said Tim Congdon of Gerrard & National in London. [Tabular Data Omitted]

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