Analysis-Mantra of central bank independence shaken by Trump moves on Fed

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RegExp("[?&]notifications=1(&|#|$)");"desktop"===y&&i&&b.test(window.location.search)&&(i.checked=!0)};be("ybar-mod-notification",(function(e){var t={isUH3:"crunch"===e.getConfig().ytheme,notifContainer:document.getElementById("notification-container"),notifBadge:document.getElementById("notif-badge"),notifMenu:document.getElementById("ybarNotificationMenu"),notifMenuOpener:document.querySelector("#ybarNotificationMenu + label"),notifDropdown:document.getElementById("notifDropdownContainer"),tooltipContainer:document.querySelector(".".concat(Vn)),notifLabel:document.querySelector(".".concat($n))};t.notifDropdown&&ro(e,t)}))}()}};]]>Francesco CanepaTue, Aug 26, 2025, 3:22 PM 5 min readBy Francesco CanepaFRANKFURT (Reuters) -U.S. President Donald Trump's attacks on Federal Reserve policymakers are emerging as the biggest threat in decades to central bank independence, which is widely seen as key to keeping down inflation and maintaining stability in the global financial system.Trump's unprecedented threat to fire Fed governor Lisa Cook over alleged mortgage-related improprieties and his relentless pressure on Fed chair Jerome Powell to cut interest rates are already testing the boundaries of presidential power over the U.S. central bank.They are also leading central bankers worldwide to worry about their independence from governments and calling into question a principle that has helped them keep inflation lower and more stable since the mid-1980s.That was when Fed chair Paul Volcker established the Fed's inflation-fighting credibility and independence from the Treasury, reining in price growth with high interest rates and setting an example that would be followed by scores of central banks in subsequent decades."People don't realize how different the world has been in the past 30 years from what it was before in terms of inflation stability," Jordi Galí, a professor at the Barcelona School of Economics, said.The world's biggest central banks such as the Fed, the European Central Bank and the Bank of Japan are unique institutions in that they are typically led by political appointees and yet they don't take orders from their governments.This is because they have a very specific mandate, which is typically to keep inflation around 2% although some central banks like the Fed are also tasked with taking employment into account.This set-up leaves them free to set interest rates at the levels they see fit to achieve that goal.But independence is a relatively new concept and some central banks, like those of China, Turkey and other developing countries, are still influenced by their governments when setting policy.The Fed itself has been formally independent since 1951 but it only established its reputation in the 1980s when Volcker raised interest rates to double digits to stop runaway prices, which had been the result of energy shocks and Fed mismanagement of the supply of money.Since then, more than a hundred central banks, including the Bank of England in 1998, have been granted increasing degrees of formal independence, such as the ability to make decisions irrespective of government wishes and a prohibition to lend to the government.The results have been striking.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,437.90 -1.42 (-0.02%)Dow 3045,265.59 -16.88 (-0.04%)Nasdaq21,457.21 +7.92 (+0.04%)Russell 20002,339.17 -22.78 (-0.96%)VIX15.29 +0.50 (+3.38%)Gold3,418.70 +1.20 (+0.04%)PortfolioSign in to access your portfolioSign inTop gainersSSL Sasol Limited 6.98 +0.69 (+10.97%)PRM Perimeter Solutions, Inc. 21.21 +1.73 (+8.88%)IREN IREN Limited 23.12 +1.69 (+7.89%)MP MP Materials Corp. 72.31 +4.43 (+6.53%)RKLB Rocket Lab Corporation 47.22 +2.84 (+6.40%)Top losersNEGG Newegg Commerce, Inc. 85.00 -15.75 (-15.63%)KDP Keurig Dr Pepper Inc. 31.10 -4.03 (-11.48%)FRPT Freshpet, Inc. 56.29 -6.33 (-10.11%)TNXP Tonix Pharmaceuticals Holding Corp. 34.59 -3.39 (-8.93%)BMA Banco Macro S.A. 60.00 -5.54 (-8.45%)Most activeOPEN 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