Lagarde says central bank independence is critically important

European Central Bank President Christine Lagarde warned against questioning the independence of policymakers and their institutions, arguing that economies risk becoming dysfunctional if governments get involved in setting interest rates.

“The independence of any central bank is critically important,” Lagarde said on Fox News’ Sunday Morning Futures. “We have to be accountable, we have to report back and answer all the questions of either Congress in the US or the European Parliament, for me. But it’s vitally important that a central bank is independent.”

She added that during her time at the top of the International Monetary Fund, she had a chance to watch what happens when central bank independence comes under threat.

“It becomes dysfunctional, it starts doing things that it shouldn’t do,” Lagarde said. “The next step is disruption. It is instability, if not worse. So I think that this should not be debated.”

In the US, where Lagarde attended the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, Fed Chair Jerome Powell is under relentless attack from US President Donald Trump for refusing to lower rates. Officials attending the gathering expressed their support for him with a standing ovation before his speech.