RBI Governor Calls for Global Protection of Central Bank Independence
Reserve Bank of India Governor Sanjay Malhotra made a strong statement on Tuesday about the importance of central bank independence. He said this principle must be preserved collectively across all jurisdictions. His comments came in response to questions about recent developments involving Federal Reserve Chairman Jerome Powell.
Malhotra's Firm Stand on Central Bank Autonomy
Malhotra explained that central bank independence has become a global standard over the years. He stressed the need to separate monetary policy from government influence. "Central bank independence is very important," Malhotra stated clearly. "We need to all collectively, across jurisdictions, preserve it. Hopefully, that should only improve over the years."
The RBI Governor's remarks follow significant news from the United States. The Department of Justice has opened a criminal investigation against Fed Chair Jerome Powell. This investigation relates to Powell's testimony about renovations at the Federal Reserve headquarters last June.
Global Central Bankers Rally Behind Powell
On the same day as Malhotra's comments, prominent central bankers worldwide issued a joint statement supporting Powell. European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey, and Swiss National Bank Chairman Martin Schlegel led this show of solidarity.
Their statement declared, "We stand in full solidarity with the Federal Reserve System and its Chair Jerome H Powell. The independence of central banks is a cornerstone of price, financial and economic stability." They emphasized that preserving this independence is critical for serving citizens effectively.
Other central bankers joining the statement included:
- Sveriges Riksbank Governor Erik Thedéen
- Reserve Bank of Australia Governor Michele Bullock
- Bank of Canada Governor Tiff Macklem
- Bank for International Settlements officials François Villeroy de Galhau and Pablo Hernández de Cos
The statement praised Powell for serving with integrity and unwavering commitment to public interest. It described him as a respected colleague held in highest regard.
Powell's Defense of Fed Independence
Powell himself addressed the investigation in a Sunday statement. He revealed that the Justice Department served the Federal Reserve with grand jury subpoenas. These subpoenas threaten criminal indictment related to his Senate testimony about office renovations.
The Fed Chair connected this legal action to the central bank's policy decisions. He said the threat of criminal charges results from "the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President."
Powell framed the issue clearly. "This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation."
India's Economic Performance Amid Global Challenges
Malhotra also commented on India's economic situation during his interview with NDTV Profit. He noted that despite global uncertainties, India continues to grow at one of the highest rates among major economies.
"We are very hopeful that India, with all the reforms that the government is pushing and the other regulators too are pursuing, is on a good wicket, and we will continue to do well," the RBI Governor expressed optimistically.
India's growth primarily stems from its domestic demand-driven economy. Recent data supports this assessment. During the first half of the current fiscal year, the country's GDP grew at 8.2 percent in the second quarter of FY2026. This represents the fastest pace in six quarters.
According to the Ministry of Statistics and Programme Implementation's first advance estimate, the economy is expected to grow at 7.4 percent in FY26. These numbers demonstrate India's economic resilience.
Historical Context of Powell's Leadership
This is not the first time Malhotra has commented on Powell's leadership. In July last year, the RBI Governor praised Powell for maintaining the Federal Reserve's independence effectively.
Powell has faced political pressure throughout his tenure. Since assuming office, former President Trump repeatedly attacked Powell. Trump criticized him for not cutting interest rates aggressively enough. He even called Powell a "numbskull" publicly.
The current investigation adds another layer of challenge to Powell's role. It tests the boundaries between legitimate oversight and political interference in central banking.
Malhotra's comments reflect broader concerns among central bankers worldwide. They worry about maintaining institutional independence while navigating complex political environments. The collective defense of Powell signals their determination to protect this fundamental principle.
As global economic uncertainties persist, the role of independent central banks becomes increasingly crucial. Their ability to make evidence-based decisions without political pressure affects financial stability worldwide. Malhotra's emphasis on preserving this independence highlights its significance for India and the global economy.
