Financial markets face a growing threat of ‘fiscal dominance’ – when finance ministries force central banks to underwrite government debt or reduce interest rates to cope with burgeoning government debt. As has long been recognised, hampering central banks’ independence weakens safeguards against inflation, upsets markets and ends up not supporting but reducing growth. Fragile economies such as Argentina and Türkiye illustrate the hazards of allowing monetary policy to become hostage to fiscal imperatives. Today, the risk extends to the US, Europe and Japan. With mounting public debt, the danger is that price ... (full story)