Central bank independence is very important, need to collectively preserve it, says RBI Governor Malhotra

In light of the recent criminal investigation opened against Federal Reserve Chairman Jerome Powell by the US Department of Justice (DOJ), Reserve Bank of India Governor Sanjay Malhotra on Tuesday asserted that the independence of central banks is paramount and it must be collectively preserved across jurisdictions.

“Central bank(s) independence is very important. We have over the years moved globally (towards central bank independence) … because it’s important to separate that from government. And so, it is something that we need to all collectively, across jurisdictions, preserve. And hopefully, that should happen, that should only improve over the years,” Malhotra said when asked about his views on the Fed Chair’s recent statement.

On Sunday, Powell, in a statement, disclosed that the DOJ served the Federal Reserve with grand jury subpoenas, threatening criminal indictment related to his testimony about renovation of the Fed office before the Senate Banking Committee last June. A subpoena is a written order to attend a court of law to give evidence, and the case in question pertains to some building renovations at the Fed’s headquarters in Washington, DC.

The Fed Chair added that the threat of criminal charges is a ‘consequence of 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’.

“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,” Powell said.

In July last year, the RBI Governor had praised Powell for doing a good job of maintaining the independence of the central bank.

Since assuming the office of President, Trump has repeatedly attacked Powell, criticising him for not cutting interest rates, and even branding him a “numbskull”.

Malhotra’s comments come on a day when a group of global central bankers rallied behind Powell and issued a statement defending him.

“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 in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability,” European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey, and Swiss National Bank Chairman of the Governing Board Martin Schlegel said in a joint statement.

Powell, the statement said, has served with “integrity, focused on his mandate and an unwavering commitment to the public interest”. “To us, he is a respected colleague who is held in the highest regard by all who have worked with him,” the statement read.

Other central bankers party to the statement include Sveriges Riksbank Governor Erik Thedéen, Reserve Bank of Australia Governor Michele Bullock, Bank of Canada Governor Tiff Macklem, Bank for International Settlements Chair of the Board of Directors François Villeroy de Galhau, and Bank for International Settlements General Manager Pablo Hernández de Cos.

Malhotra further said that amid global uncertainties, India is growing at one of the highest rates amongst major economies, primarily because it is a domestic demand-driven economy.

During the first half of the current fiscal, the country’s GDP grew at 8.2 percent in Q2 FY2026 — the fastest pace in six quarters. The economy is expected to grow at 7.4 per cent in FY26, according to the first advance estimate of the number released by the Ministry of Statistics and Programme Implementation (MoSPI).

“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,” he said in an interview with NDTV Profit.