Key insights
- Bank of France Governor Villeroy defended central bank independence, highlighting its role in maintaining low inflation and interest rates. His comments come amid concerns about political interference with the Federal Reserve, including potential challenges to the transition of Fed leadership. This raises uncertainty about future monetary policy and could negatively impact market sentiment.
WASHINGTON, April 16 (Reuters) - Central bank independence is a prerequisite for successful monetary policy, Bank of France Governor Francois Villeroy de Galhau said on Thursday.
"I know it’s criticized. It’s under attack, including sometimes in this country," Villeroy told an event during the spring meetings of the International Monetary Fund and World Bank in Washington, underscoring that central bank independence was agreed as part of democratic structures, not by the bankers themselves.
"It’s for our economies and society, because the practical experience is that independence brings lower inflation and lower interest rates," he said. "So I hope we can stick with that everywhere. It will help through this crisis."
Villeroy’s comments reflect deep concerns among U.S. allies about repeated attacks against current Federal Reserve Chair Jerome Powell over what Trump argued was his tardy action to lower U.S. interest rates, as well as a criminal investigation into the renovation of the central bank’s headquarters in Washington.
Trump on Wednesday threatened to fire Powell from his separate seat on the Fed’s Board of Governors if Powell does not vacate that post when his term as central bank chief ends on May 15.
The prospect of a smooth-and-on-time transition to Trump’s pick for the next Fed chief, Kevin Warsh, looks increasingly to be on shaky ground, setting up a possible clash over who runs things in the meantime.