‘Serious danger’ if Trump gains control over US monetary policy, warns European central bank chief

Christine Lagarde, President of the European Central Bank, has voiced concern over the possibility of US President Donald Trump gaining control over US monetary policy, describing the prospect as a “very serious danger” for both the American and the global economies. 

In an interview with France’s Radio Classique on Monday, Lagarde warned that undermining the independence of the Federal Reserve could destabilise systems worldwide. 

Lagarde’s comments come amid growing scrutiny of Trump’s efforts to reshape the Federal Reserve. Trump is seeking to remove Federal Reserve Governor Lisa Cook, a move critics say is an effort to fill the central bank with officials who would be more supportive of his push for lower interest rates, AFP reported.

Trump has also nominated Stephen Miran, one of his top economic advisers, to temporarily fill a vacant seat after the surprise resignation of Governor Adriana Kugler. Miran has been openly critical of the Fed’s recent actions and is often credited as the ‘mind’ behind Trump’s economic policies, including the tariffs on other countries.

Importance of central bank independence

Lagarde emphasised the importance of the central bank’s independence in maintaining economic stability. She noted that the central bank’s policies are designed to ensure price stability and promote “optimal” employment.

The bank chief warned that if the central bank’s decisions were dictated by Trump’s diktats, this would disrupt the US economy. 

“If it depended on the diktats of one person or another … the balance of the US economy, and consequently the effects it would have on the entire world, would be very worrying,” she said as quoted by AFP.

Can Trump gain control?

While Lagarde acknowledged the risks of Trump taking over the Federal Reserve’s decision-making power, she also said it would be “very difficult” for Trump “to completely swing the majority” of the Fed’s policymaking body in his favour.

But, she also said, “if he were to succeed, it would be a very serious danger for the US economy and for the world economy.”