US Fed Losing Independence Would Be a ‘Serious Danger’, Warns ECB Chief Lagarde
European Central Bank President Christine Lagarde has issued a stark warning that any move by President Donald Trump to undermine the independence of the US Federal Reserve would pose a “very serious danger” to both the US and global economies.
In an interview with French radio station Radio Classique, Lagarde said that political interference in the Fed’s decision-making would be “very worrying” and could destabilize not only the US economy but also the broader global financial system.
“If that policy wasn’t independent anymore, if it was dependent on political diktats from one person or another, then the balance of the US economy—and consequently the impacts that has on the world as a whole, because it is the world’s largest economy—would be very worrying,” she said.
Trump’s Pressure on the Fed
Since returning to office in January, President Trump has repeatedly criticized the Federal Reserve and its chair, Jerome Powell—whom he appointed during his first term—for keeping interest rates too high. Trump has publicly called for rates to be slashed to below 1% from the current target of 4.25% to 4.5%, claiming lower rates would boost growth and reduce federal borrowing costs.
Despite these pressures, the Fed has kept rates unchanged since December last year, citing persistent inflation concerns—particularly the risk of Trump’s trade tariffs driving prices higher.
A rate cut is widely expected later this month, but it’s unlikely to meet the sharp reductions Trump is demanding.
Attempts to Remove Fed Officials
The tension between the White House and the Fed escalated further when Trump recently tried to remove one of the central bank’s governors, Lisa Cook, accusing her of making false statements about her mortgage. Her legal team has denied the claims and is contesting the move in court.
Lagarde noted that while Trump may exert pressure, it would be difficult for him to directly control Fed policy. US law only allows the removal of a Federal Reserve governor in cases of gross misconduct, and the structure of the Federal Open Market Committee (FOMC)—which includes seven governors and the heads of regional Fed banks—makes it challenging for any president to secure a majority aligned with their agenda.
Even though Powell was a Trump appointee, the two have often clashed. In July, Trump derided Powell as a “numbskull,” blaming him for keeping interest rates too high and making housing unaffordable for Americans.
Independence Under Threat?
The Federal Reserve operates independently of the US government, with a dual mandate to maintain stable prices and support employment. However, Trump’s continued efforts to influence its decisions are raising concerns among economists and global policymakers.
Lagarde’s comments underscore the risks of politicizing monetary policy, especially in the world’s largest economy. Central bank independence is widely viewed as essential for maintaining market confidence and long-term economic stability.
While it remains unlikely that Trump could fully seize control of the Fed, Lagarde’s warning highlights the global stakes involved if the institution’s autonomy is compromised.
