Political interference in central banks risks economic harm, ECB president warns
Political interference in central banks risks economic harm, ECB president warns
Share:
Comments by Christine Lagarde seen as veiled warning to Donald Trump, who demanded Federal Reserve lower interest rates ‘immediately’. Political interference in central bank policymaking could harm plans to bring down inflation, the head of the European Central Bank (ECB) has said.
![[Donald Trump appearing on a screen while giving a remote speech to the World Economic Forum in Davos]](https://i.guim.co.uk/img/media/d315bb2816abe4a7e14241a50a16a110abb7bd70/0_0_2000_1200/master/2000.jpg?width=445&dpr=1&s=none&crop=none)
In a veiled warning to Donald Trump, after the US president last week demanded the Federal Reserve “immediately” lower interest rates, the ECB president, Christine Lagarde, said meddling by politicians could lead to greater economic volatility and sharply rising prices.
Trump said last week that the Fed boss, Jerome Powell, should cut the cost of borrowing to boost economic growth. The US president also said he was ready to force a cut in oil prices to bring down inflation. This move would allow central banks to reduce interest rates “all across the world”.
While Trump’s comments repeat his battle with Powell during his previous term in office, there is widespread concern the Fed chief may choose to resign, potentially spooking financial markets. Lagarde told a Hungarian central bank conference: “While recent research suggests that de jure central bank independence has never been more prevalent than it is today, there is no doubt that the de facto independence of central banks is being called into question in several parts of the world.”.
The Fed is expected to keep interest rates on hold this week while the ECB is forecast to cut. Fed officials are likely to argue that inflation has declined at a slow pace and that some policy proposals of the Trump administration could actually increase price pressures, argument likely to draw criticism from the White House.
