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Lagarde Warns Trump Control of Fed Would Be a 'Very Serious Danger'

She says U.S. legal precedent limiting the removal of Fed governors to grave misconduct makes such a takeover difficult.

Overview

  • Speaking on Sept. 1, ECB President Christine Lagarde said politicizing U.S. monetary policy would endanger the American economy and transmit risks worldwide.
  • Lagarde stressed that Federal Reserve independence is crucial for maintaining price stability and supporting optimal employment in the United States.
  • She cited a U.S. Supreme Court precedent that allows removal of a Fed governor only for grave misconduct, saying that makes it hard to reshape the board’s majority.
  • News reports note that President Trump has pressed for rate cuts, attacked Chair Jerome Powell, and is seeking the removal of Governor Lisa Cook over alleged mortgage misrepresentations.
  • Lagarde also flagged that potential government collapses in euro-area countries concern markets, while adding that France does not meet conditions for IMF intervention.