Kazaks warns that the ECB cannot afford to be complacent as pressure on the Fed increases risks

ECB policymaker Martins Kazaks warned that the European Central Bank must remain vigilant as the U.S. administration’s criticism of the Federal Reserve introduces new risks to the global economic outlook. He was speaking after Fed Chair Jerome Powell was reportedly threatened with criminal charges over remarks about the renovation of the central bank’s headquarters, a move that has raised concerns about the independence of the world’s most influential monetary authority.

Kazaks, who heads Latvia’s central bank and is a contender for the ECB’s vice presidency, said such attacks resembled the politics of emerging economies and added to growing uncertainties facing the ECB, alongside the potential for an AI-driven financial bubble and China’s assertive trade practices. He stressed that risks to both inflation and growth exist on both sides, leaving no room for complacency, and warned that weakening the Fed’s independence could ultimately hurt lower-income Americans through higher inflation and interest rates. On China, he criticized subsidies, rare-earth export limits, and exchange-rate policies that restrain the yuan’s rise, suggesting they may conflict with WTO rules, and called on Europe to respond through long-overdue reforms and, if necessary, targeted industrial policy.

Kazaks said ECB interest rates remain appropriate, noting that euro zone inflation is showing positive signs, with even core inflation measures—excluding volatile items—moving closer to the ECB’s 2% target.

Sources: Bloomberg