Lagarde Backs Powell Amid Trump Criticism, ECB Eyes 2% Inflation by 2025

European Central Bank President Christine Lagarde has expressed her confidence in the tenure of Federal Reserve Chair Jerome Powell, stating that she does not believe he will be removed from his position. In an interview, Lagarde emphasized that both she and Powell are accustomed to political pressure and that she holds him in great respect. This statement comes amidst ongoing tensions between Powell and former U.S. President Donald Trump, who has publicly criticized Powell for not lowering interest rates more aggressively.

Trump's criticism of Powell has been persistent, with the repeatedly calling for Powell's removal through his social media platform. Trump has accused Powell of not acting swiftly enough to cut interest rates, a stance that has drawn significant attention and debate. However, Powell has maintained that the Federal Reserve will remain independent and that he will not step down before the end of his term in 2026. The legal safeguards protecting the Federal Reserve from political pressure have been a point of contention, with some analysts suggesting that Trump's attempts to remove Powell would test these safeguards.

The independence of the Federal Reserve is a critical aspect of its role in managing the U.S. economy. Powell has been adamant about maintaining this independence, asserting that his removal would require evidence of cause, a standard that is difficult to meet. This stance has been supported by legal experts who argue that the Federal Reserve's independence is essential for its effectiveness in managing monetary policy.

Lagarde's comments underscore the importance of central bank independence and the need for leaders to withstand political pressure. Her respect for Powell reflects a broader recognition of the challenges faced by central bankers in navigating complex economic landscapes while maintaining their institutional autonomy. The ongoing debate over Powell's tenure highlights the delicate balance between political influence and economic policy, a balance that is crucial for the stability and growth of the global economy.

Regarding the economic situation, Lagarde stated that tariffs have a negative impact on economic growth. The European Central Bank will rely heavily on data performance in its decision-making. There is room for negotiation between Europe and Trump. It is expected that the inflation rate will reach the ECB's 2% target by 2025, and economic growth faces downside risks.