Advocates for Safeguarding the Autonomy of Central Banks
In a speech given in Vienna, Austria, François Villeroy de Galhau, Governor of the Bank of France, called for the defense of central bank independence. His remarks came in response to U.S. President Donald Trump's pressure on the Federal Reserve, particularly his attempts to remove Fed governor Lisa Cook.
Villeroy de Galhau argued that central bank independence is not for the bankers, but for the service of all citizens. He emphasized that it is a condition for managing inflation effectively and is not an obstacle to low interest rates.
Similar concerns have been raised by Christine Lagarde, president of the European Central Bank (ECB). She deemed a takeover of U.S. monetary policy by Mr. Trump a "very serious danger" for the U.S. and global economy.
The case regarding the removal of Fed governor Lisa Cook is currently before U.S. justice. Accusations from the presidential camp allege that she lied to obtain mortgages at more favorable rates. However, President Trump does not have another official opposing candidate to remove Cook from the Fed. Legally, a president can only remove Federal Reserve governors for cause, and Cook may contest the dismissal.
The governor of the Bank of England (BoE), Andrew Bailey, is also concerned about threats to the independence of the Fed. He recently stated that the situation is a "very serious situation."
Mr. Trump has repeatedly attacked Fed chairman Jerome Powell for being slow to lower U.S. interest rates. If the Fed leaves its rates unchanged in July, the market estimates that it should lower them at the end of its next meeting on September 16 and 17.
The removal of Fed governor Lisa Cook, if it occurs, would provide Mr. Trump with the opportunity to appoint a new personality to the Fed. Villeroy de Galhau argued that questioning central bank independence is dangerous for democracy.
The speech was given in honor of Robert Holzmann, Governor of the Austrian central bank and a member of the Governing Council of the ECB. Villeroy de Galhau's call for the defense of central bank independence adds to the growing global concern over political interference in monetary policy.
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