Lagarde Cautions Against Trump’s Push for Control Over US Monetary Policy
European Central Bank (ECB) President, Christine Lagarde has cautioned that there could be “serious danger” to the stability of both the U.S. and global economy if President Donald Trump succeeds in tightening his grip on America’s monetary policy.
In an interview with France’s Radio Classique on Monday, Lagarde stressed that the independence of central banks is vital for maintaining credibility and stability.
She noted that while it would be difficult for any U.S. president to completely sway the Federal Reserve’s decision-making process, attempts to do so could have far-reaching consequences.
Her warning comes amid growing tension in Washington, where President Trump has stepped up pressure on the Federal Reserve. The president has openly criticised Fed Chair, Jerome Powell for refusing to cut interest rates as aggressively as he wants and has taken steps to remove Fed Governor Lisa Cook — a move that has sparked legal battles and raised concerns about the boundaries of executive authority.
Lagarde explained that the structure of the Federal Reserve was specifically designed to shield it from short-term political pressures. “Central banks must remain independent,” she said. “If monetary policy is dictated by politics rather than economic fundamentals, the consequences will be grave for price stability, growth, and global financial markets.”
Legal analysts have highlighted that U.S. law only permits the removal of a Federal Reserve governor in cases of misconduct, making Trump’s bid to dismiss Cook highly contentious. Cook has already challenged the move in court, reinforcing the checks and balances that protect the Fed’s independence.
However, economists warn that persistent political interference, even without direct dismissals, could weaken the institution’s credibility over time.
The uncertainty has unsettled financial markets, with investors closely watching developments in Washington.
Analysts warn that politicising the Fed could lead to higher inflation expectations, rising borrowing costs, and volatility in global markets. Given the central role of the U.S. economy, any erosion of the Fed’s autonomy would inevitably spill over to other countries, affecting trade flows, investments, and global growth.
Lagarde’s remarks echo the concerns of several international policymakers who fear that undermining the independence of the Federal Reserve could destabilise the global economy. She emphasised that trust in central banks is built on their ability to make decisions free of political influence, and once that trust is shaken, restoring it becomes extremely difficult.
The White House, however, has defended Trump’s stance, framing it as an effort to hold the Federal Reserve accountable for its policy decisions. Still, many economists argue that the clash represents the most serious test of the Fed’s independence in decades.
As the legal and political battle unfolds, Lagarde’s warning adds to mounting international pressure on Washington to preserve the long-standing separation between politics and monetary policy. For global markets and economies alike, the outcome could determine whether one of the world’s most influential financial institutions retains its independence — or faces an uncertain future shaped by political control.
