Trump controlling Fed would be 'serious danger' to the world, says ECB president Christine Lagarde

Effects throughout the world would be 'very worrying', says Ms Lagarde

The Federal Reserve losing its independence would pose a “serious danger” to the world, according to European Central Bank president Christine Lagarde. Picture: AP Photo/Michael Probst

The Federal Reserve losing its independence would pose a “serious danger” to the world, according to European Central Bank president Christine Lagarde.

But Ms Lagarde told Radio Classique in an interview on Monday that US president Donald Trump would find it “very difficult” to take control of the US central bank, citing legal precedents that prevent the removal of Fed 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.”

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,” Ms Lagarde said.

Mr Trump has launched an unprecedented attack on the Fed, demanding it lower interest rates that he considers are far too high. As well as repeatedly berating Fed chair Jerome Powell, he’s moved to fire governor Lisa Cook, who’s fighting the dismissal in court.

Turning to Europe, Ms Lagarde said the ECB European Central Bank has achieved price stability and will do whatever is necessary to keep euro-area inflation in check. The inflation objective is met with 2% and “we will continue to take necessary measures to ensure inflation is under control and prices are stable,” she said.

The comments come before an inflation report that’s expected to confirm the ECB’s assessment that euro-zone price pressures are under control. Economists polled by Bloomberg predict a reading of 2% — matching the central bank’s goal.

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’re comfortable with the current level of 2%. 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.

Investors are no longer sure there’ll be any more cuts this year, though economists still see one final move in December. On the growth outlook, Ms Lagarde highlighted that the trade between the European Union and the US has “considerably reduced” uncertainty.

Bloomberg