Christine Lagarde, President of the European Central Bank (ECB), expressed her hope on Tuesday that the possibility of U.S. President Donald Trump dismissing Federal Reserve Chair Jerome Powell was not a viable concern.
In an interview with Finance Newso’s Sara Eisen, Lagarde addressed whether this scenario posed any material risk to the markets, stating, “I certainly hope not … I hope that it is not a risk.”
Lagarde, who was speaking at the IMF World Bank Spring Meetings, refrained from commenting on the potential market impact of an event she hopes will not materialize.
Trump has been vocal in his expectations for Powell to lower interest rates, warning that the U.S. economy risks deceleration otherwise. Last week, Powell acknowledged that Trump’s trade policies could hinder growth and spur inflation but did not confirm any forthcoming adjustments to the interest rate trajectory, indicating that “for the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
While Trump appointed Powell during his initial term, he is now exploring the legality of terminating the Fed Chair’s position before his term concludes.
Lagarde remarked, “We’re both used to political pressure in one way or the other,” expressing her respect for Powell’s dedication and diligence in fulfilling his mandate. “For him, I think, I’m sure as it is for me, the mandate is our compass. We have to deliver on our mandate,” she added.
The divergence in monetary policy between the ECB and the Federal Reserve has become increasingly apparent. The ECB continues to lower rates amid sluggish growth and rising inflation in the eurozone, while the Fed has opted to maintain steady rates following three consecutive cuts from September to December of the previous year.
Just last week, the ECB enacted another 25 basis point decrease, marking its third rate cut in 2025 and its seventh reduction since it began easing monetary policy the previous summer. In their monetary policy updates, the ECB indicated concerns regarding a weakened growth outlook, largely influenced by the global trade uncertainties stemming from Trump’s tariff strategies.
Scope for EU-U.S. trade negotiation
Lagarde also touched on the implications of Trump’s tariff policies, noting that the tariff rates currently imposed on the eurozone are significantly higher than the 10% blanket tariff enforced on other U.S. trading partners, including additional 25% duties on steel, aluminum, and automobiles. She cautioned that the EU could face universal 25% tariffs if negotiations do not lead to a satisfactory outcome.
“I am sure that there is scope for negotiations. It’s in the nature of policymakers to want to sit down and argue their case and point out their imperatives, their red lines, their vulnerabilities, and I’m sure that there can be a dialogue,” Lagarde stated, adding, “I would be surprised if there was not such a thing.”
The EU has temporarily halted its initial set of counter-tariffs in response to the metal tariffs while negotiations are ongoing. Lagarde expressed her disagreement with Trump’s assertion that the EU unfairly treats the U.S. in trade matters due to its goods surplus, highlighting that their economic relationship encompasses both services and foreign direct investment.
“There is so much joint interest” between the U.S. and Europe, she remarked. “There might be sectors where serious negotiations need to be had, but it’s as always with trade … it’s not just on one side; it’s on both sides.”
