Donald Trump’s efforts to influence the US Federal Reserve risk destabilising the global economy, the president of the European Central Bank has warned.
Christine Lagarde said attempts by the US president to undermine the independence of the world’s most powerful central bank would have repercussions well beyond America’s borders.
Speaking to France’s Radio Classique, Lagarde said removing the Fed chair, Jerome Powell, or governor Lisa Cook would be a “very serious danger for the US economy and the world economy”.
“If US monetary policy were no longer independent and instead dependent on the dictates of this or that person, then the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying, because it is the largest economy in the world,” she said, in remarks reported by Reuters.
Trump has long criticised Powell for failing to cut interest rates and has threatened to dismiss him. He has also moved to remove Cook, who is appealing against the decision in a case that could reach the US supreme court.
Cook’s lawyers told a hearing on Friday that she could not be dismissed without due notice or “cause”, as required by law, and that she had only learned of Trump’s attempt to remove her through a social media post. Cook’s term runs until 2038, and her legal team has argued the president has “no authority” to terminate her position.
Dismissal of Cook would give Trump the chance to nominate a replacement, potentially reshaping the Fed’s policymaking. Economists and investors have warned that such political interference could damage the central bank’s credibility in controlling inflation. US government borrowing costs have already risen in recent months amid fears over Trump’s tariff policies and doubts about the Fed’s independence.
Lagarde noted that it would be “very difficult” for Trump to exert direct control over interest rate decisions. “The US supreme court, which is largely respected in the country and therefore I hope will be respected by [Trump] as well, has clearly indicated that a Fed governor can only be dismissed in the case of gross misconduct,” she said.
Trump’s criticism of the Fed has been supported by Liz Truss, the former UK prime minister, whose short-lived premiership collapsed in 2022 following turmoil in the financial markets.
