Central bank independence depends on its leaders: Lagarde

European Central Bank chief Christine Lagarde said Monday that a central bank’s independence depends on its leaders, in remarks that come amid heightened concerns over the political pressure faced by her US counterparts.

“Independence ultimately has to live in the culture and conviction of the people who serve these institutions –- because sooner or later, the legal limits will be tested,” Lagarde told a conference in Washington. The US Federal Reserve has been facing growing political pressure under Donald Trump’s second presidency.

The US leader has sought to oust a sitting Fed governor over claims of mortgage fraud and repeatedly slammed Fed chairman Jerome Powell, whose term at the helm ends in May, for not cutting interest rates more aggressively.

In a rare rebuke last month, Powell said US authorities’ investigation into him over renovation costs at the Fed’s headquarters was about whether monetary policy will be swayed by political pressure or intimidation.

Already, Lagarde was among central bank chiefs who threw their support behind Powell in January as US authorities issued subpoenas against him threatening a criminal indictment.

Looking ahead, Trump has named former Fed official Kevin Warsh as his choice for the next Fed chairman.

Lagarde noted Monday that former Fed chair Paul Volcker once raised interest rates to “levels that induced the deepest recession since the 1930s and came as a result under sustained political attack.”

“His act of personal conviction changed the trajectory of central banking not only in this country, the United States, but worldwide,” she added.

It is the same tradition that Powell has “upheld with such resolve,” Lagarde said.

She stressed that although legal frameworks are necessary in ensuring central bank independence, these alone are not enough.

“Laws can be rewritten, mandates reinterpreted, institutional norms hollowed out,” she said.

In her speech, Lagarde also pushed back on the idea that the European Union’s structure “condemns us to inaction,” pointing to the ECB’s ability to respond to crises.