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Christine Lagarde States That Donald Trump’s Attempt to Remove Jerome Powell and Lisa Cook from the Fed Threatens the Independence of Monetary Policy.
The recent statements from the President of the United States, Donald Trump, and his attempts to interfere with the Federal Reserve (Fed) have provoked strong reactions on the international stage.
The President of the European Central Bank, Christine Lagarde, stated that the possibility of removing the Fed chair, Jerome Powell, or director Lisa Cook represents a “very serious danger” to the global economy.
Criticism of Powell and Cook
Trump has intensified his attacks against Jerome Powell. He accuses him of not cutting short-term interest rates at the pace he deems necessary to boost the American economy.
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While a Brazilian works 113 hours to buy the basic food basket, a Portuguese person needs only 18 hours to take essential food home.
Additionally, he has once again targeted Lisa Cook, the Fed director, whom he is attempting to remove from her position, increasing pressure on the institution.
According to Lagarde, if the monetary policy of the United States ceases to be independent and begins to rely on personal decisions, the impact would be concerning.
She emphasized that the effects would reach the entire world, as the U.S. represents the largest global economy.
Court Ruling Amplifies Uncertainties
Another point that reinforces the atmosphere of instability is the decision by an American court last Friday (29).
The Justice concluded that most of the tariffs imposed by Trump are illegal. For Lagarde, this determination adds an “additional layer of uncertainty” to international economic prospects.
Trump had imposed tariffs on several countries using the International Emergency Economic Powers Act of 1977. However, the judges found that this law does not grant unlimited power to the president to tax nearly all imports.
The tariff package included various countries and even affected Brazil with rates of up to 50%. However, it remains unclear how the court’s decision will directly affect Brazil, as Trump has used other legal mechanisms to maintain some tariffs.
Pressure on the Federal Reserve
Trump’s offensive against the Fed is part of his economic strategy.
He seeks greater influence over monetary policy by trying to secure a majority on the board of the institution. Thus, he would be able to directly interfere in decisions regarding interest rates in the U.S.
Recently, Trump announced the dismissal of Lisa Cook, accusing her of mortgage fraud. According to him, Cook had declared two residences as primary to obtain better financing conditions.
However, Fed legislation stipulates that the president cannot dismiss board members without proving serious misconduct.
The direct dismissal of a member of the Board of Governors by presidential decision would be unprecedented. The very design of the Federal Reserve was intended to prevent such political pressure. Therefore, Trump’s actions raise alarms not only in Washington but also in other parts of the world.
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