Central banks face a “serious challenge” to their independence from populist parties that threatens to undermine economic prosperity, the Bank of England governor warned on Friday. Andrew Bailey told an audience in London that growing scepticism towards public institutions meant central banks “cannot take legitimacy for granted” and needed to step up efforts to show their actions served the public good. “We should recognise what is at stake,” he said, adding: “Sustained economic prosperity depends upon . . . confidence that the value of money will remain stable, including that the financial system will remain resilient. Those conditions cannot be created overnight.

They depend upon institutions that are trusted, durable and credible.”Bailey’s intervention reflects concern among senior central bankers at Donald Trump’s attacks on the independence of the US Federal Reserve as well as fears that policymakers in Europe and elsewhere will increasingly be subject to similar pressures. It comes against a backdrop of high sovereign debt and rising borrowing costs that could also fuel calls for central banks to cut interest rates or use their balance sheets to help fund public spending. It also follows a long period of high inflation in many parts of the world driven primarily by supply shocks that make it challenging to contain price pressures without painful trade-offs. “A series of controversial decisions since the global financial crisis and years of above-target inflation leaves them [central banks] more vulnerable than ever to political attacks on their independence,” Isabelle Mateos y Lago, chief economist at BNP Paribas, said in a note published this week.

Trump has urged the Fed to slash rates throughout his second term and Fed governor Lisa Cook is fighting a year-long White House campaign to fire her over alleged mortgage fraud. Meanwhile, there is ongoing speculation over whether European Central Bank president Christine Lagarde will stand down early so that a successor can be appointed before a possible populist victory in next April’s French presidential election. Bailey himself has resisted pressure from the Reform UK leader Nigel Farage over the Bo E’s plans to develop digital currency, assuring MPs in July that he was “able to spot” lobbying.

Populist claims that public institutions were “an unrepresentative elite standing between the people and their will” were “a serious challenge”, Bailey said on Friday, adding that central banks drew legitimacy from “the plurality of society, not in the preferences of any single group within it”. But Bailey also acknowledged other reasons for growing scepticism towards central banks — in particular, their increased role in financial stability policies that have a direct effect on the social distribution of wealth and welfare. Some critics argue that central banks are “too close to financial interests”, he noted, while financial institutions themselves often complain that regulation has gone too far.

This underlined the need for “insulation from short-term political pressures”, he added, so they could make decisions “that do not align with the private interests of any constituency or group".