NextFin news, On Friday, September 19, 2025, US President Donald Trump escalated his attacks on the Federal Reserve, the US central bank, by criticizing its delayed cuts to interest rates and questioning its independence. These actions have raised alarms among economists and global financial leaders about the potential risks to economic stability.
Trump has repeatedly criticized Fed Chair Jerome Powell for not lowering interest rates quickly enough to support the weakening US economy. Although the Fed cut rates on Wednesday for the first time this year, the reduction was considered insufficient by Stephen Miran, a new Fed governor appointed by Trump.
Lower interest rates typically encourage borrowing by households and businesses, stimulating economic growth but also carrying the risk of increased inflation. Additionally, lower rates reduce the cost of government borrowing, which is significant given the rising US public debt and the recent extension of Trump’s tax cuts that are expected to widen the deficit further.
Despite political pressure, the Federal Reserve under Powell has maintained a data-driven policy approach, resisting calls for rapid rate cuts. However, Trump is attempting to reshape the Fed's leadership by appointing loyalists and is seeking to remove Governor Lisa Cook, a case currently before the Supreme Court. Several key Fed seats, including Powell’s, are up for appointment in 2026.
International financial authorities have expressed concern over these developments. Christine Lagarde, President of the European Central Bank, warned that a takeover of US monetary policy by Trump would pose a "very serious danger" to the global economy. Andrew Bailey, Governor of the Bank of England, described undermining the Fed's autonomy as "a very dangerous road." Stephan Bales, an expert from Germany’s KfW bank, emphasized that central bank independence is "not a technical detail but a cornerstone of economic stability." Ingrid Hengster, head of Barclays’ German branch, noted that if interest rate decisions no longer reflect economic realities in good faith, investor confidence would erode.
Examples from other countries illustrate the risks of politicized central banks. Turkey, with one of the highest inflation rates globally exceeding 30% in August, suffers from a less independent central bank. Emerging markets like Brazil have also faced political pressure on monetary policy. Studies show that countries with independent central banks generally maintain lower inflation rates.
Experts warn that 2026 will be a critical test for the Fed's independence and, by extension, the stability of the global financial system. There is concern that Trump's pressure on the Fed could encourage similar political interference in emerging markets. The European Central Bank also faces indirect pressures, particularly due to high public debt levels in the eurozone, notably France, which could push the ECB toward policies favoring state financing.
In summary, President Trump's ongoing attacks on the Federal Reserve's interest rate policies and attempts to influence its leadership have sparked widespread concern about the erosion of central bank independence, a key factor in maintaining price stability and investor confidence both in the US and globally.
Source: AFP, Yen.com.gh, Citizen Tribune, The Grand Junction Daily Sentinel (September 19, 2025)
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