US Fed Loss of Independence a Serious Danger, Says Lagarde
Published: September 1, 2025
European Central Bank President Christine Lagarde issued a stark warning today: if the U.S. Federal Reserve loses its independence, it would pose a “very serious danger” not only to the American economy, but to the global financial system as well (Reuters, The Guardian).
Why Federal Reserve Independence Matters
The Fed’s autonomy is foundational to monetary stability. Without it, policy decisions could become politicized, undermining trust and predictability in financial markets. As Lagarde noted, the Fed’s independence supports price stability and optimal employment, and any disruption could have far-reaching consequences across global markets (Daily Sabah, Taipei Times).
What Triggered Lagarde’s Alarm
Lagarde’s warning comes amid intense political pressure from U.S. President Donald Trump, who has:
- Publicly criticized Federal Reserve Chair Jerome Powell for resisting interest rate cuts.
- Attempted to remove Governor Lisa Cook—who is currently challenging her removal in court, asserting the President lacks the authority without proven misconduct (Reuters, The Guardian, The Washington Post).
This escalating interference is already stirring uncertainty in financial markets, with legal setbacks—such as the recent court ruling invalidating many of Trump’s tariffs—adding to the unstable environment (Reuters, Outlook India).
Global Repercussions
Lagarde emphasized that any deviation from central bank autonomy would ripple through the global economy, given the U.S.’s dominant role. Markets worry about rising borrowing costs and weakened investor confidence in U.S. debt (The Times, The Guardian, MarketWatch).
A Financial Times survey underscores that:
- 94% of economists believe markets haven’t fully priced in these risks.
- 89% feel the Fed’s credibility is already damaged.
- Many foresee that by the end of Trump’s term, political influence over the Fed may become entrenched (MarketWatch, Financial Times).
Broader Warning from the IMF
Lagarde’s stance echoes the International Monetary Fund’s earlier caution: central bank independence is vital to anchor inflation expectations and ensure economic stability. Without it, we risk macroeconomic, financial, and monetary instability (Investing.com).
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Securing the Fed’s autonomy isn’t just an internal matter—it’s a global imperative. Let me know if you’d like to include charts, market reactions, or expert commentary to further enrich this post.
