German central bank chief Joachim Nagel and Austrian chief Martin Kocher both point out that the possible loss of the Federal Reserve’s independence poses serious risks.
Nagel said in the Wednesday edition of the “Frankfurter Allgemeine Zeitung” that the U.S. government’s attacks on the Fed are “really worrisome”. He added that witnessing the Fed’s independence being eroded can feel “devastating”. Despite his concerns, he calls Fed Chair Jerome Powell an “excellent central banker” and a “good‑natured guy”.
Kocher warned that a similar loss of independence could lead to outcomes as disastrous as those that followed the oil‑price shock of the 1970s. Back then, the United States experienced more than a decade of inflation rates over five percent, partly because political influence caused monetary policy to respond too weakly at first.
Both officials view the euro area’s policy rates as currently at an appropriate level. Nagel quoted ECB economics chief Philip Lane, who says there are presently no strong arguments for a rate change in either direction. Kocher added that he is “comfortable with the calm” and that this calm is “not boredom”.
When asked about German demands that the Bundesbank withdraw its gold holdings from the United States, Nagel replied that he does not doubt the safety of Germany’s gold at the Fed in New York. He said these reserves are protected under special safeguards.