Erosion of Fed independence would lead to higher inflation, ECB's Rehn says

By Anne Kauranen

HELSINKI (Reuters) -U.S. President Donald Trump's escalating attacks on the Federal Reserve could have substantial and global knock-on effects on the financial markets and the real economy, including higher inflation, ECB policymaker Olli Rehn said on Thursday.

Questions over the independence of the Fed, the world's most important monetary authority, have arisen this year as Trump repeatedly criticised its Chair Jerome Powell and on Monday announced he was firing one of its governors, Lisa Cook.

"If the central bank's independence were truly to crumble, and the U.S. Federal Reserve began making decisions on grounds other than sound monetary policy principles — for example, because the president demands lower interest rates — the inevitable consequence would be inflation