Central bank governors Joachim Nagel of Germany’s Bundesbank and Martin Kocher of Austria’s Oesterreichische Nationalbank have warned that the United States’ Federal Reserve (Fed) is at risk of losing its independence, a development they see as fraught with danger.
“Attacks by the U.S. government on the central bank are truly alarming” Nagel told the “Frankfurter Allgemeine Zeitung” in its Wednesday edition. “When you see the Fed’s independence being torpedoed, it hits you in the gut”. He nevertheless praised Fed Chair Jerome Powell as “a superb central banker” and “a genuinely decent man”.
Kocher cautioned that a loss of Fed independence could mirror the catastrophic inflation of the 1970s, when, after the oil‑price shock, the United States ran more than five per cent inflation for a decade. “Political interference in monetary policy meant that the response was not strong enough at first” he said.
In their view, policy rates in the euro area remain appropriately set. Nagel echoed comments from ECB chief economist Philip Lane, who said he sees no compelling reason to adjust rates either way. “I can only agree with that” Nagel added. Kocher, for his part, welcomed a bit of calm, noting it is not boredom.
When German officials requested that the Bundesbank withdraw its gold holdings from the United States, Nagel rejected the proposal. “I have no doubt that our gold remains securely stored at the Fed in New York” he said. “These are currency reserves with special protection”.
