ECB’s Kocher Says Democracy Favors Central Bank Independence

26 January 2026

By David Barwick – LONDON (Econostream) – European Central Bank Governing Council member Martin Kocher on Monday said that democracies favored monetary policy autonomy because the electorate realized the wisdom of committing themselves.

In an academic lecture at the London School of Economics, Kocher, who heads the Austrian National Bank, identified at least three reasons for central banks to be independent. One reason was to avoid the co-opting of the monetary authority to finance the state, he said.

Another was “avoiding political business cycles in monetary policy,” while a third was “allowing for long-term policy perspectives, including implementing (in the short-term) unpopular but necessary policies,” he said.

Central bank independence was stable in democracies despite voters’ apparent indifference towards the long term, he suggested, because “voters want to commit themselves to an effective monetary policy, but know that they would become myopic, once inflation is higher.”

That is, he said, there was an awareness of the danger of becoming “myopic at some stage.”

Therefore, he said, “The long-run self can restrict the short-run self by choosing commitment devices or setting rules, but doing so may be costly.”

Still, trust in the central bank is necessary for this, he said. “Otherwise, it will not work and nobody will use it as a commitment device,” he said.

This created a strong incentive for central banks to be “an effective commitment device, i.e. to invest in trust to preserve their independence,” he said. Central banks could do this by pursuing transparency and accountability, by making decisions genuinely in the public interest and by communicating well, he said.