Supped-up central banks may be too powerful-IMF

LONDON, March 25 (Reuters) - Major central banks could become too powerful if they are given far-reaching new powers but remain fully independent from politics, the International Monetary Fund's chief economist Olivier Blanchard, said on Monday.

The roles of major central banks including the U.S. Federal Reserve, European Central Bank and Bank of England, have all been extended in the wake of the banking-turned-debt crisis, to include banking supervision and stand-back economic oversight.

Speaking in a panel discussion at the London School of Economics, Blanchard questioned the rationale of pushing so much influence into the hands of unelected technocrats.

"If you think that central banks now as having this much larger set of responsibilities and this much larger set of tools, then the issue of central bank independence becomes much more difficult," Blanchard said.

"Do you actually want to give an independent central bank the right to chose loan to value ratios without the supervision from the political process. Isn't this going to lead to a democratic deficit in a way where a central bank becomes too powerful."

(Reporting by Marc Jones and Marius Zaharia; editing by Ron Askew)

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Keywords: IMF CENTRAL BANKS/BLANCHARD