The governor of the European Central Bank has cautioned that there would be a “grave danger” to the world economy if President Donald Trump were to weaken the US Federal Reserve’s independence. According to Christine Lagarde, the Fed’s capacity to respond to political orders would have a “very worrying” effect on global economic stability as well as US economic stability.
Trump has repeatedly attacked Jerome Powell, the chair of the Federal Reserve, since taking office. He tried to remove Lisa Cook, one of its governors, last month. However, Lagarde emphasized that the president’s wish would be “difficult” to implement in reality.
The US central bank, the Federal Reserve, is primarily responsible for maintaining price stability and fostering employment. To achieve these objectives, it determines interest rate policy and is intended to operate independently of the US government.
However, both during his first term and when he returned to office in January, President Trump has regularly been displeased with its choices. In an effort to increase economic development and reduce the government’s borrowing costs, he has often stated his desire to see significant reductions in US interest rates. The current range of the Federal Reserve’s target for the federal funds rate is 4.25% to 4.5%. Trump wants that figure lowered to around 1 per cent.
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