European Central Bank President Christine Lagarde on Monday said Donald Trump’s push to remove top Federal Reserve officials poses a “very serious danger for the U.S. economy and the world economy,” according to her interview with Radio Classique.
The comments came just days after a U.S. federal court ruled that most of Trump’s previous tariffs were illegal, a decision Lagarde said adds “a further layer of uncertainty” to an already unstable global economic outlook.
Trump has been repeatedly attacking Jerome Powell for refusing to cut short-term interest rates. He’s also trying to fire Lisa Cook, another key official at the Fed.
That has drawn international concern, especially from Lagarde, who said monetary policy in the United States should never be controlled by “the dictates of this or that person.”
She warned that if the Fed loses its independence, the balance of the American economy could be seriously disrupted, which would have global consequences because the U.S. is the largest economy in the world.
Lagarde says illegal tariffs, Fed threats deepen economic risk
The warning comes as Trump’s trade policies are again under scrutiny. On Friday, a U.S. appeals court ruled that the majority of tariffs imposed by Trump during his first term were illegal. Lagarde, speaking directly on the matter, said the ruling only increases uncertainty.
The European Central Bank has been closely watching developments in Washington as both trade and monetary policy in the U.S. impact the eurozone economy.
Meanwhile, Lagarde also used the interview to confirm that the ECB has successfully brought eurozone inflation to its target. She said inflation is “under control” and standing at the central bank’s 2% objective.
“We will continue to take necessary measures to ensure inflation is under control and prices are stable,” she said, just days before the next inflation report is expected to be released. Bloomberg’s latest poll of economists expects inflation to hold steady at 2%, in line with ECB targets.
Rates are currently sitting at 2%, and officials are not expected to change them in the upcoming meeting. At the last ECB gathering in July, most policymakers said inflation risks were “broadly balanced” and described the European economy as showing “resilience.”
Despite economic headwinds from Trump’s revived tariff threats and the ongoing war in Ukraine, there has been no shift in ECB strategy. Still, some economists see a final rate cut possibly coming in December, but investors are less certain.
Lagarde also said that trade between the U.S. and European Union has become less predictable. That drop in reliability has been weighing on long-term confidence and slowing down economic activity between the two regions. It’s a pattern that’s continued into Trump’s second presidency, as market participants brace for more protectionist policies from Washington.
German inflation picks up, ECB holds ground on rates
Germany, the largest economy in Europe, reported a jump in inflation in August. The latest data shows inflation rose to 2.1%, up from 1.8% in July. That’s higher than economists expected and shows a combination of rising food prices and a slower decline in energy costs.
The 2.1% figure came in above the 2% estimate in a Bloomberg poll, but officials are not alarmed. ECB members are not viewing this as a reason to hike interest rates.
The Bundesbank, Germany’s central bank, issued a separate update last week saying inflation will likely stay above 2% for the next few months.
They’re attributing the rise mostly to base effects and called the current spike “temporary.” However, they also said the broader situation remains “highly uncertain” due to ongoing geopolitical tensions.
Germany’s economy is still struggling after two straight years of contraction. Growth remains weak, and Chancellor Friedrich Merz is facing rising pressure to fix it.
For now, Germany’s sluggish recovery continues to drag on the eurozone.
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Source: https://www.cryptopolitan.com/lagarde-trump-bullying-fed-serious-threat/
