Concerns about Hungarian bank indepedence spark resignation

Reuters sources report that the deputy governor of the Hungarian central bank will step down amid concerns over central bank independence. He has made the move "to signal seriousness of the situation".

Allister Heath warned that attitudes were shifting against bank independence in 2011:

Discretion is back, central banks are once again taking over financial regulation and monetary stability is much less of a political priority. Central banks now have to make choices about what types of securities to take into their portfolio; when there is a possibility of a loss, an implicit subsidy is involved. Combined with QE, central banks are now operating a quasi-fiscal policy. No wonder pressure for repoliticisation is mounting, especially in the US and EU.

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In the UK, chancellor George Osborne has called on the Monetary Policy Committee to pursue further monetary activism, placing pressure on current governor Sir Mervyn King. We saw a knock to the reputation of incoming Bank governor Mark Carney as speculations grew that he has future political ambitions.

Across the Atlantic, Fed chairman Ben Bernanke is a registered Republican, but his dovish monetary policy faces harsh criticiscism as being ideologically motivated by Democrat arguments. In recent hearings Bernanke has looked much more like a Democrat politician than an independent central banker.

Now radical monetary easing has begun in Japan where policy is even more explicitly political. Prime Minister Shinzo Abe looked for a central bank head who would agree to his aim to hit two per cent inflation in a short time frame. The previous incumbent, Masaaki Shirakawa, was averse to these calls for political control of monetary policy. His replacement Haruhiko Kuroda has been willing to accommodate the premier's political goals.

But if you want evidence that central bankers are now politically involved, look no further than the European Central Bank's Mario Draghi. He appears to be running the show at the European Union.