... its power and prestige. Being independent of Government control poses a number of issues for economic debate. By being given freedom from government control, the independent central bank has full control over domestic, or in the case of the European Central Bank, member nations monetary policy, consequently commanding the interest rates and the money supply of an economy. By independent central bank I must stress this is independent in operational terms only. The targets are set politically; the bank chooses the best means to achieve the target. Here I consider arguments for the independent central bank, using the European Central Bank as my chosen example. In the short term, there is a direct trade off between unemployment and expected inflation. That is, if inflation is higher than economic agents expect, and then the price rises they see will appear to be real increases in value. When production becomes more valuable firms consequently produce more, ...

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