IMF’s Chief Economist Stresses Central Bank Independence

By Andrea Shalal and Francesco Canepa

WASHINGTON (Reuters) – The IMF’s chief economist, Pierre-Olivier Gourinchas, emphasized the importance of central bank independence in the face of U.S. President Donald Trump’s criticisms of Federal Reserve Chair Jerome Powell. He noted that maintaining this independence is crucial for central banks to effectively manage inflation, especially in the U.S., where Trump’s tariffs may contribute to rising prices.

Gourinchas stated, “The critical thing is to make sure that inflation expectations remain anchored… central banks will do what is necessary to bring inflation back to targets in an orderly manner.” He highlighted that while central banks possess tools such as interest rates and policy management, their credibility stems from independence.

Trump has recently increased his attacks on the Fed, criticising Powell for not cutting interest rates effectively. White House economic adviser Kevin Hassett mentioned that Trump’s team is contemplating whether Powell can be dismissed, while Trump warned about potential economic slowdown unless rates are lowered immediately.

Despite some investors considering the possibility of Powell’s ousting, it remains legally uncertain. The Fed chair is appointed by the president but requires Senate confirmation. Trump’s past attempts to dismiss members of independent agencies are currently being reviewed by the Supreme Court.

The ongoing criticism from Trump has caused market fluctuations, with U.S. share prices falling initially before recovering as investors shifted focus to corporate earnings. Meanwhile, European Central Bank President Christine Lagarde expressed her support for Powell, highlighting the political pressures both leaders face in their roles.

Responding to questions about the potential markets impact should Trump attempt to remove Powell, Lagarde stated, “I’m not going to comment on market reactions to hypotheticals that I hope are just not on the table.”