Lagarde: Political influence threatens c. banks independence

European Central Bank President Christine Lagarde has warned that increasing political interference in central banks could undermine their independence and hinder their ability to control inflation.

Speaking at a Hungarian central bank conference via video conferencing, Lagarde emphasised that while legal independence remains strong, operational independence is being questioned globally.

Lagarde highlighted the risks of political pressure, warning it could lead to macroeconomic volatility, higher bond yields, exchange rate fluctuations, and rising risk premiums. This instability could weaken central banks’ ability to deliver on their inflation mandates, eroding public confidence and exacerbating economic volatility.

Her remarks follow recent comments by US President Donald Trump, who criticised the Federal Reserve and suggested he would push for lower interest rates, claiming he knows more about monetary policy than the current decision-makers.

Lagarde cautioned that persistent political interference could create a “vicious circle,” further destabilising economies and diminishing the consensus needed to uphold central bank independence.

Attribution: Reuters

Subediting: M. S. Salama