The rise of populist politics threatens to undermine the independence of central banks and their ability to protect the long-term interests of the global economy, Andrew Bailey has warned.

In a speech delivered in London (full speech), the Bank of England governor accused populist parties of seeking to exert growing influence over monetary authorities around the world, a move he said would "damage the public interest".

Bailey cautioned that central banks are among several institutions that parties on both political extremes are attempting to undermine as part of their claim to represent "the authentic will of the people".

"Any institution seen to get in the way becomes an unrepresentative elite standing between the people and their will, and thus an obstacle to popular sovereignty," he said.

"This is a serious challenge."

"Courts of law, universities, regulatory bodies and central banks all derive authority through forms of democratic delegation set within a framework of that plural society," he added. "Maintaining the trust that goes with that delegation matters deeply."

Central bank chiefs under attack

The remarks follow a series of high-profile attacks on central banks, the most prominent being the regular broadsides Donald Trump directed at former Federal Reserve chair Jay Powell. The US President's campaign against Powell began with repeated calls for faster interest rate cuts and culminated in the Department of Justice launching an investigation into the central bank chief.

The now-dropped probe ostensibly concerned the Fed's mismanagement of major upgrades to its Washington headquarters. However, many observers, including every living former Federal Reserve chair, condemned it as an attempt to undermine Powell's authority.

Turkiye's President Recep Tayyip Erdogan has ousted several of the country's central bank governors who opposed lowering interest rates, a period during which the lira lost much of its value and inflation surged into double digits before the central bank later pivoted to steep rate hikes under a new governor. Hungary and India have also announced measures that weaken the independence of their central banks.

The debate matters beyond central banking circles because operational independence, granted to the Bank of England by the Labour government in 1997, is widely credited by economists with helping to bring down inflation expectations in the UK, and similar arrangements underpin the Federal Reserve, the European Central Bank and other major monetary authorities. A speech by a serving BoE governor defending that model in explicitly political terms is comparatively rare, and it comes as populist and Eurosceptic parties have made criticism of unelected institutions a recurring theme in several European elections.

Speaking on Friday, Bailey argued that efforts to bring central banks under government control tend to backfire. Lawmakers generally pursue "short-term monetary policies that ultimately undermine economic stability" and set off events that make it difficult to control the value of money, he said.

"The value of money is something upon which every household and every business rely," he added. "To be effective in the sense of trust and legitimacy in society, support for such a public good should come from the plurality of society rather than any single member group."