Paris (Reuters) – The independence of a central bank does not constitute an obstacle to a low interest rate environment, said François Villeroy de Galhau, governor of the Banque de France (BDF) and member of the European Central Bank (ECB) on Wednesday.
These words echo those of other central bankers who defend the preservation of the independence of the American Federal Reserve (Fed) while the White House seems to want to interfere in the decisions of the institution.
US President Donald Trump has publicly criticized the Fed and its president on several occasions, Jerome Powell, not having dropped the guiding rates and has recently undertaken to dismiss a Fed governor Lisa Cook.
“Independence is not an obstacle to reasonably low interest rates. On the contrary, it is a prerequisite,” said François Villeroy de Galhau, at a conference in Vienna.
According to the boss of the BDF, the independence of a central bank vis-à-vis political leaders allows him to control long-term inflation and to anchor the expectations of inflation of households and businesses.
The president of the ECB, Christine Lagarde, warned on Monday that there would be repercussions on the world economy if the Fed lost its independence, with regard to the size of the American economy.
The governor of the Bank of England (BOE), Andrew Bailey, said Wednesday “very concerned” by the threats to the independence of the Fed, believing that this is a “very serious” problem.
(Written by Leigh Thomas; Claude Chendjou, edited by Blandine Hénault)
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