The President of the European Central Bank (ECB), Christine Lagarde, warns that President Donald Trump’s attempts to make influence on the US Central Bank, the Federal Reserve, can pose a serious danger to both American economy and the world economy. According to Lagarde, the independence of American monetary policy is at stake.
Trump criticism on Powell and Cook
In recent months, Trump has openly expressed his dissatisfaction with the policy of FED chairman Jerome Powell. He reproaches Powell that the short interest rate remains too high and threatened to fire him several times. In addition, Trump has removed Fed Gourverneur Lisa Cook from her position because she would have committed mortgage fraud.
However, the Federal Reserve is an independent entity and the US government, even the president, should not have an authority about the Central Bank. Lagarde emphasizes in an interview with Radio Classique that an undermining of this independence of the Federal Reserve can have major consequences:
“If the American monetary policy were no longer independent and instead becomes dependent on the whims of this or that person, then I think the consequences for the balance of the American economy, and through its effects worldwide, would be very disturbing because it is the largest economy in the world.”
Extra uncertainty due to trade disputes
In addition to the tensions around the Federal Reserve, Lagarde also points to the uncertainty caused by recent legal developments in the United States. An American Court of Appeal ruled last Friday that most import rates entered by Trump are illegal.
According to Lagarde, this adds an “extra layer of uncertainty” to the prospects for the world economy. It also damages Trump’s already shaky credibility. The comments from the ECB president underline the vulnerable balance between politics and monetary policy in the United States.
Source: https://newsbit.nl/ecb-president-waarschuwt-trump-vormt-gevaar-voor-wereldwijde-economie/
