ECB Warns of Global Financial Risks Amid Political Interference in Federal Reserve

European Central Bank (ECB) policymaker Olli Rehn has voiced significant concerns over U.S. President Donald Trump's recent actions that threaten the independence of the Federal Reserve, warning that such political interference could destabilize global financial markets.

In a speech delivered on August 28, 2025, Rehn highlighted that President Trump's ongoing criticisms of Federal Reserve Chair Jerome Powell and the dismissal of Fed Governor Lisa Cook pose substantial risks to the autonomy of the U.S. central bank. He emphasized that undermining the Fed's independence could have far-reaching consequences for global economic stability.

Rehn, who serves as the Governor of Finland's central bank and is a member of the ECB's Governing Council, stated, "The Fed's independence, a principle upheld since the 1980s, is now wobbling badly due to political pressure." He stressed that such interference could lead to significant global effects on financial markets and the real economy. Rehn also urged European leaders to bolster confidence in the euro to protect the autonomy of European central banks.

The controversy centers around President Trump's recent dismissal of Federal Reserve Governor Lisa Cook. On August 25, 2025, Trump announced Cook's removal, citing allegations of mortgage fraud from 2021, prior to her appointment. Cook, the first Black woman to serve on the Fed's Board of Governors, has denied the allegations and filed a lawsuit challenging her dismissal. Her legal team argues that the removal undermines the Federal Reserve's century-old political independence.

Cook's attorney, Abbe Lowell, stated, "President Trump has no authority to remove Federal Reserve Governor Lisa Cook. His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis." The lawsuit seeks an emergency injunction to prevent her removal and to compel the Fed to treat her as an active governor.

The Federal Reserve Act allows a president to remove a member of the Federal Reserve Board of Governors "for cause," an ambiguous term historically interpreted to mean inefficiency, neglect of duty, or malfeasance. Legal experts suggest that the case could become a turning point for the Federal Reserve, potentially reshaping its longstanding political independence.

President Trump's actions have drawn criticism from various quarters. Senate Minority Leader Charles E. Schumer stated, "This attempted firing shreds the independence of the Fed and puts every American's savings and mortgage at risk." House Financial Services ranking member Maxine Waters added that Trump is trying to take control of the Fed to secure a majority on the Board of Governors and more quickly gain full control over monetary policy.

The implications of undermining the Fed's independence are profound. Political interference in central banking can erode investor trust, leading to capital flight and reduced investment, which are detrimental to economic growth. Rehn's call for reinforcing confidence in the euro underscores the importance of protecting the ECB's independence to prevent similar political pressures in Europe.

As this unprecedented legal battle unfolds, the global community remains vigilant to preserve the autonomy of central banking institutions, ensuring sustained economic stability and investor confidence.