Lagarde warns against subverting central bank independence

WASHINGTON: Under-mining a central bank’s independence would trigger economic dysfunction, the European Central Bank’s president warned in remarks in the United States, where President Donald Trump is seeking to shape monetary policy.

Such independence is “critically important,” Christine Lagarde said in an interview broadcast Sunday on Fox, a network popular with conservatives including Trump, after she attended annual meetings in Jackson Hole, Wyoming alongside US Federal Reserve chair Jerome Powell.

“I have seen close hand what happens when a central bank stops being independent or when its independence is under threat,” said Lagarde, referring to her time working with financial institutions while heading the International Monetary Fund from 2011 until she moved to the ECB in 2019.

“It becomes dysfunctional, it starts doing things that it shouldn’t do,” the French national told Fox News Channel’s “Sunday Morning Futures.”

“And the next step is really — yes, it is disruption. It is instability, if not worse.”

Since returning to power in January, Trump has been pressuring the Fed to lower interest rates, which affect borrowing costs and the overall economy.

With the US central bank holding rates steady for months, the Republican president has embarked on a campaign to undermine Powell in the hope of hastening his departure from the institution.