Finance
Loss of Fed independence could push up inflation all around the world, Bundesbank warns
Published by Global Banking & Finance Review®
Posted on February 12, 2026
2 min readLast updated: February 12, 2026
Home > Finance > Loss of Fed independence could push up inflation all around the world, Bundesbank warns
Quick Summary
Bundesbank warns that losing Fed independence may boost global inflation, affecting central banks worldwide.
Bundesbank Warns: Fed's Loss of Independence May Fuel Global Inflation
Impact of Fed Independence on Global Inflation
FRANKFURT, Feb 12 (Reuters) - A loss of independence at the U.S. Federal Reserve could raise political pressure on central banks all around the world and boost inflation for everyone, Bundesbank President Joachim Nagel said on Wednesday.
Political Pressure on Central Banks
U.S. President Donald Trump has put relentless pressure on the Fed to cut interest rates and last month picked former Federal Reserve Governor Kevin Warsh to lead the bank from May, all in the hopes he would reduce the Fed's market footprint and lower borrowing costs.
ECB's Position on Independence
"If this political pressure succeeds, it could be taken as a blueprint for politicians in other countries to pursue similar policies," Nagel said. "If that were to happen, inflation levels could increase all over the world."
Global Economic Interconnections
While central bankers, including ECB chief Christine Lagarde and Bank of England Governor Andrew Bailey have welcomed Warsh's nomination, pressure on the Fed is expected to remain high, especially if the bank pauses policy easing until mid-year, as markets now expect.
Nagel said that the ECB's own independence is well protected but policymakers should not be overly complacent.
"Since the world economy is interconnected, political pressure in one country could make pursuing price stability more difficult for the Eurosystem as well," he said.
The ECB has been keeping inflation at its 2% target for nearly a year now, an enviable position as most major central banks are struggling to hit their own objective.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
Key Takeaways
- •Loss of Fed independence could increase global inflation.
- •Political pressure on central banks may rise worldwide.
- •ECB's independence is currently well protected.
- •Global economic interconnections affect price stability.
- •ECB maintains its 2% inflation target successfully.
Frequently Asked Questions about Loss of Fed independence could push up inflation all around the world, Bundesbank warns
1What is inflation?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
2What is a central bank?
A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees monetary policy and aims to maintain economic stability.
3What is monetary policy?
Monetary policy refers to the actions taken by a central bank to control the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
4What is financial stability?
Financial stability is a condition where the financial system operates effectively, with institutions able to withstand economic shocks, ensuring the smooth functioning of financial markets.
5What is economic growth?
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP).
