Populism poses serious challenge to independent central banks, Bailey says

Andrew Bailey's remarks arrive at a curious moment—delivered, as they were, against the backdrop of Reform UK's annual gathering in Birmingham. The juxtaposition is almost too neat: the governor of the Bank of England warning about populism while a populist party meets a few miles away. But the deeper point Bailey is making deserves more than a dismissive shrug. He is conceding, perhaps more candidly than any recent predecessor, that central bank independence rests on a fragile social contract. That contract was never written in law alone; it was sustained by a broad consensus that monetary policy was too important to be left to politicians. That consensus has frayed. The populist critique is not without substance. For years, central banks operated with remarkable autonomy, making decisions that shaped mortgages, savings, employment, and the cost of living—yet the people making those decisions were neither elected nor, in many cases, particularly accountable. When inflation surged after the pandemic, central banks were slow to react, and when they did, the medicine was painful. It is hardly surprising that voters began to ask who, exactly, these people are, and why they should be trusted. Bailey's acknowledgment that bankers risk being seen as an "unrepresentative elite" is, in that light, not just defensive—it is an admission that the public's skepticism has a rational basis. Yet the alternative to independence is not obviously better. History is littered with examples of governments that, when given control of monetary policy, printed money to fund spending, ignited inflation, and destroyed savings. The challenge, then, is not to abandon independence but to make it legible. Bailey's prescription—that central bankers must explain their decisions more clearly—sounds modest, but it is quietly radical. It suggests that the legitimacy of the institution depends on its ability to communicate, to persuade, and to be seen as serving the public interest rather than protecting its own turf. The deeper question is whether explanation alone will be enough. Populism thrives not on misunderstanding but on genuine grievance—on the sense that institutions are rigged in favor of insiders. Central banks cannot solve housing affordability, stagnant wages, or regional inequality, yet they are often blamed for them. Bailey's speech is a step toward humility, but humility is not the same as accountability. If central banks want to survive the populist wave, they may need to do more than talk; they may need to reconsider what independence means in a democracy that no longer trusts its elites, elected or otherwise. The full remarks can be read at The Guardian: https://www.theguardian.com/business/2026/sep/04/populism-serious-challenge-independence-central-banks-andrew-bailey