The president of the European Central Bank (ECB), Christine Lagarde, highlighted at a forum in Washington the importance of central banks maintaining their independence from political power, in reference to the United States Federal Reserve (Fed).
“Without this protected, appreciated and celebrated independence, as well as protected by accountability, I don’t think we would be able to respond, as we have done up until now, to controlling inflation and responding to inflation expectations. I think this is in the DNA of an efficient central bank. And, as you know, it is not a recipe for total success, and it should not be seen in isolation; I think this cannot be achieved without accountability”, said Lagarde, this Monday, 23, at a forum of the Association National Conference on Business Economics, held in the capital of the United States.
Lagarde’s statements come in the context of doubts about the direction of the American central bank in the face of pressure from the President of the United States, Donald Trump, and about the future performance of Kevin Warsh, candidate for president of the Federal Reserve, recently appointed by the White House tenant.
According to Lagarde, it is not a question of central banks enjoying “an independence without control”, but of “an independence with a strong consideration for responsibility towards the representatives of the people”, and she gave as an example her appearances before the European Parliament.
The ECB president and former leader of the International Monetary Fund called the notion that central banks “live in an ivory tower and have no understanding or idea what is happening in their economies” “extremely unfair and false.”
“If you look at the institution that I know best, the ECB, firstly, we have constant contact with the corporate world, whether financial or non-financial companies. Secondly, we go out a lot and communicate with them. And I really ask the members of my board of directors to go to the base, to the supermarket, and to understand the intricacies of life”, added Lagarde, who considered that the work of monetary policy institutions “has to be rooted in real life” and that this is also “part of that responsibility”.
Donald Trump this month nominated Kevin Warsh to replace the current president of the Federal Reserve, Jerome Powell, in May, on whom the US President exerted unprecedented pressure to reduce interest rates, opening an investigation into alleged excessive costs in renovating the US central bank’s headquarters and going so far as to say that anyone who did not agree with him “would never be president of the Fed”.
In any case, analysts and markets seem to have positively received Warsh’s candidacy, which they consider capable of maintaining the Fed’s independence.
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