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<\/p>\nPresident Trump would inflict \u201cvery serious\u201d damage on the US and global economy if he were to sack Federal Reserve chairman Jerome Powell or governor Lisa Cook, a top central banker has warned.<\/p>\n
There would be \u201cvery worrying\u201d consequences for economic stability if Trump succeeded in his attempts to encroach on the Federal Reserve\u2019s independence, Christine Lagarde, president of the European Central Bank (ECB), said in a radio interview on Monday with the French broadcaster Radio Classique.<\/p>\n
\u201cIf US monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying, because it is the largest economy in the world,\u201d she said.<\/p>\n
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Federal Reserve chairman Jerome Powell (left) and Federal Reserve board of governors member Lisa Cook have both been attacked by President Trump<\/p>\n
MARK SCHIEFELBEIN\/AP<\/p>\n
The comments reflect efforts among the central banking community outside the United States to rally behind Powell<\/a>, who has been repeatedly attacked by Trump, and other Fed officials and promote the benefits of keeping monetary policy separate from the political sphere. <\/p>\n Trump, on social media<\/a>, often calls Powell a \u201cnumbskull\u201d and \u201cstubborn mule\u201d given the chairman\u2019s resistance to cutting interest rates, which have stood at 4.25 per cent to 4.5 per cent since December last year. Investors have assigned a near 90 per cent chance of a quarter-point rate cut at the Fed\u2019s next meeting on September 17.<\/p>\n \u2022 Business live: the latest on companies, markets and economics<\/a><\/p>\n Last week Trump said he had fired Lisa Cook, a governor on the Federal Reserve board, with immediate effect after she was alleged to have falsified documents to obtain a lower interest rate on her mortgage. Cook is trying to overturn her dismissal<\/a> in the courts.<\/p>\n New economic figures released over the next ten days are likely to trigger sharp swings in financial markets and crystallise investor expectations over whether the Fed will lower rates. <\/p>\n Dario Perkins, managing director of global macro at TS Lombard, an investment firm, warned that inflation \u2014 presently at 2.7 per cent \u2014 could get out of hand if the Fed lost its independence, prompting a \u201cday of reckoning\u201d for the US economy.Some investors may have warmed to the idea of the Trump administration exerting greater pressure on the Fed as it could lead to lower interest rates, Perkins said.<\/p>\n \u201cPeople say Fed capture is good because the economy will be hotter. That is true, up to a point\u201d, he said. <\/p>\n \u201cIf the Fed lets inflation escape, there will eventually be a day of reckoning where policymakers must address the situation. That will be more painful if credibility is lost. Perhaps that day is beyond the horizon of investors.\u201d<\/p>\n