The US Federal Reserve losing its independence would pose a “serious danger” to the world, European Central Bank (ECB) President Christine Lagarde said.
Lagarde told Radio Classique in an interview yesterday that US President Donald Trump would find it “very difficult” to take control of the Fed, citing legal precedents that prevent the removal of central bank governors.
“If he did manage to do so, I think it would pose a very serious threat to the US economy and the global economy,” she said. “Monetary policy obviously has an impact on the US in terms of maintaining price stability and ensuring optimal employment in the country.”
Photo: AFP
Without autonomy, “I believe that the stability of the US economy and, consequently, the effects that this would have throughout the world — because it is the largest economy in the world — would be very worrying,” Lagarde said.
Trump has launched an unprecedented attack on the Fed, demanding it lower interest rates that he considers are far too high. On top of repeatedly berating Fed Chair Jerome Powell, he has moved to fire Fed Governor Lisa Cook, who is fighting the dismissal in court.
Turning to Europe, Lagarde said the ECB has achieved price stability and would do whatever is necessary to keep euro-area inflation in check.
The inflation objective is met with 2 percent and “we will continue to take necessary measures to ensure inflation is under control and prices are stable,” she said.
ECB policymakers are widely expected to keep interest rates steady for another meeting when they meet in less than two weeks, as many have indicated that they were comfortable with the current 2 percent. At July’s gathering, most described inflation risks as “broadly balanced” and spoke of “resilience” in Europe’s economy — despite the headwinds from US tariffs and Russia’s war in Ukraine.
On the growth outlook, Lagarde highlighted that the trade between the EU and the US has “considerably reduced” uncertainty.
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