Undermining Fed Independence Creates Big Risks, Rehn Warns

The autonomy of the Federal Reserve is being tested for the first time in decades, leading to “significant” risks for markets and the economy, according to European Central Bank Governing Council member Olli Rehn.

“Ever since double-digit inflation was tamed in the 1980s, the Fed’s independence has been seen as an inviolable principle — now this principle is being undermined,” the Finnish official said Thursday in a speech. “When the central bank is trusted, people, companies, and financial markets believe it will stick to price stability. This trust anchors inflation expectations.”