Trump’s Fed interference poses ‘serious danger’ to world economy, warns ECB chief Christine Lagarde

Christine Lagarde, the president of the European Central Bank, warned on Monday that if US President Donald Trump removes Federal Reserve Chairman Jerome Powell or Fed Governor Lisa Cook, then this would pose a “very serious danger” for the US economy and the world economy, as it would undermine the independence of the world’s most powerful central bank. Steps by the US president to remove the Fed chair, Jerome Powell, or the governor, Lisa Cook, would be a “very serious danger for the US economy and the world economy,” ECB head Lagarde told the French broadcaster Radio Classique.

“If US monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying, because it is the largest economy in the world,” said Lagarde, the former International Monetary Fund chief, according to remarks reported by Reuters.

Trump criticised Fed chief, threatened to fire him

Trump has repeatedly criticised Federal Reserve Chairman Jerome Powell for not cutting interest rates and has threatened to fire him. He is also attempting to remove Cook, who is appealing against the decision in a case that could reach the US Supreme Court.

Cook’s lawyers argued in court on Friday that she could not be fired without the notice or “cause” required to remove a Fed governor. She learned of her attempted removal via a post on social media, they said.

If Trump fires Cook, whose term is not due to expire until 2038, he can nominate a replacement. However, Cook has argued the president has “no authority” to remove her.

‘Political interference damages credibility of central banks’

Leading investors and economists have said political interference damages the credibility of central banks to keep inflation under control. The US government’s borrowing costs have risen in recent months amid concern over the impact of Trump’s tariff policies and questions over Fed independence.

Lagarde said it would be “very difficult” for Trump to take control of Fed decision-making on interest rates. “The US Supreme Court, which is largely respected in the country and therefore I hope will be respected by [Trump] as well, has clearly indicated that a Fed governor can only be dismissed in the case of gross misconduct.”

Lagarde also told Radio Classique that the ruling by a US appeals court that most of Donald Trump’s tariffs were illegal was adding a “further layer of uncertainty” to the global economic outlook.

WATCH: ECB chief flags instability if FED independence is undermined

Likely collapse of French govt ‘concerning’

Referring to the probability of the French government collapsing, Lagarde said that as ECB chief she has observed in the last six years that political developments and political risk have an obvious impact on the economy.

“Any risk of a collapse of government in any country in the Eurozone is concerning,” she warned.

Likely collapse of French govt ‘concerning’

Referring to the probability of the French government collapsing, Lagarde said that as ECB chief she has observed in the last six years that political developments and political risk have an obvious impact on the economy.

“Any risk of a collapse of government in any country in the Eurozone is concerning,” she warned.