Christine Lagarde, the president of the European Central Bank, has warned that Donald Trump’s attempts to influence the US Federal Reserve could pose a “very serious danger” for the world economy. In an interview with French broadcaster Radio Classique, she said undermining the independence of the world’s most powerful central bank would have significant repercussions for both the United States and other countries.
Trump has repeatedly criticised Fed chair Jerome Powell for not cutting interest rates and has threatened to fire him. He is also attempting to remove governor Lisa Cook, who is appealing against the decision in a case that could reach the US Supreme Court. Lagarde noted that the Supreme Court has clearly indicated a Fed governor can only be dismissed in the case of gross misconduct, and she expressed hope that Trump would respect that.
Lagarde’s warning came as Trump received backing from Liz Truss, the shortest-serving British prime minister, who endorsed his assault on the Fed. Leading investors and economists have warned that political interference damages central bank credibility in controlling inflation.
US government borrowing costs have risen in recent months amid concerns over Trump’s tariff policies and questions about Fed independence. Similar rises have been seen across other advanced economies, linked to uncertainty in the US, elevated debt levels, and inflationary pressures from the pandemic and the war in Ukraine.
Lagarde also addressed the political crisis in France, where Prime Minister François Bayrou faces a confidence vote after struggling to pass his budget. She said such political risk has an obvious impact on the economy but downplayed the need for IMF intervention, noting that the French banking system is stronger than during the 2008 crisis.
