(Washington) — January 15, 2026 — Attacks by President Donald Trump on the Federal Reserve pose a “grave” risk to the global financial system, according to a former European Central Bank governor.
Former ECB governor Jean-Claude Trichet warned that the Trump administration’s actions threaten the long-held principle of central bank independence.
- Former ECB governor Jean-Claude Trichet warned of “grave” ramifications from Trump’s attacks on the Federal Reserve.
- A Department of Justice investigation into the Fed’s headquarters renovation is being viewed as a political attack, according to Fed Chair Jerome Powell.
- Global central bank heads have issued a joint statement defending Powell and the principle of central bank independence.
- Analysts at Citi warn that risks to central bank independence could spread beyond the U.S.
Jean-Claude Trichet, who also served as governor of the Bank of France, told CNBC’s “Squawk Box Europe” on Wednesday that the Trump administration is “trying to change the game” by challenging the nearly 50-year consensus around central bank independence in developed economies.
The concerns follow the revelation on Sunday that the Department of Justice had launched a criminal investigation into the $2.5 billion renovation of the Federal Reserve’s headquarters, as revealed by Fed Chair Jerome Powell. Powell characterized the probe as a political attack stemming from the Fed’s resistance to further and faster interest rate cuts at the behest of Trump.
On Tuesday, heads of global central banks – including Bank of England Governor Andrew Bailey and European Central Bank President Christine Lagarde – issued a joint statement in support of Powell and the Fed’s independence.
Trichet likened the treatment of Powell to monetary policy practices in emerging markets with weaker institutions, stating the “situation is extremely grave.” He emphasized that “A Federal Reserve that is the most obedient servant of the executive branch is not what is expected in the U.S. Constitution. The Fed depends on Congress, not on the executive branch.”
Why It Matters
The principle of central bank independence is considered crucial for maintaining price stability and investor confidence. When central banks are free from political interference, they can make decisions based on economic data rather than short-term political goals. Trump’s attacks, and the subsequent Justice Department investigation, raise concerns that this independence is under threat, potentially destabilizing the global economy. This is particularly concerning given current levels of global debt, which Trichet noted are higher than they were before the 2008 financial crisis.
Bank of Finland Governor Olli Rehn echoed these concerns, stating that central bank independence is a “cornerstone” of financial and price stability. He warned that undermining the Fed’s credibility could lead to a structural rise in global inflation, given the U.S.’s systemic importance to the world economy. “That would certainly have global ramifications and of course all of us, including Europe, would have to take that into account in our own decisions to safeguard price stability and economic stability more broadly,” Rehn said on CNBC’s “Squawk Box Europe” on Wednesday.
Trichet highlighted a “bipartisan consensus” in the U.S. to “spend more and more,” contributing to economic and political vulnerability as investors become wary of financing large deficits and debt-to-GDP ratios. “The market is way too calm given the risks that exist out there,” he added.
Citi analysts warned that the risks to central bank independence from populist governments could extend beyond the U.S. They noted that shortening maturities of government bonds are increasing sensitivity to policy rate decisions, potentially leading to greater pressure on future governments to lower rates.
“We are in a situation of great vulnerability of the global economy… destabilization of the relationship between the executive branch and the Federal Reserve in the U.S. is extremely worrying, extremely worrying no doubt,” said Jean-Claude Trichet.
