In a tumultuous week for global finance, President Donald Trump’s escalating campaign against the US Federal Reserve has sent shockwaves through markets, rattled international policymakers, and fueled a dramatic surge in gold prices. With the world’s largest economy showing signs of strain and the White House pushing for aggressive interest rate cuts, concerns are mounting over the future of central bank independence and the stability of the global economic order.
On September 2, 2025, Christine Lagarde, president of the European Central Bank (ECB), issued a stark warning: if President Trump succeeds in undermining the Federal Reserve’s autonomy, it could pose a “very serious danger” not just to the US, but to the entire world economy. In an interview with Radio Classique, Lagarde explained, “If that policy wasn’t independent any more, if it was dependent on political diktats from one person or another, then the balance of the US economy and consequently the impacts that has on the world as a whole, because it is the world’s largest economy, would be very worrying.” According to BBC, she also emphasized the practical challenges facing any effort by Trump to seize control, noting legal protections for Fed governors and the institution’s deliberately diffuse structure.
Lagarde’s comments came amid a flurry of moves from the Trump administration targeting the Federal Reserve. Since returning to office in January, Trump has repeatedly lambasted Fed Chair Jerome Powell for keeping interest rates “too high,” even going so far as to call him a “numbskull” in July. The president’s frustration reached a new pitch in August, when he attempted to fire Fed Governor Lisa Cook, accusing her of making false statements on her mortgage—a move her lawyers say lacks any factual or legal basis and is now being contested in court. The BBC highlighted that Trump’s attacks on the Fed have become a consistent feature of his administration’s approach to economic policy, with repeated calls to slash the main interest rate from its current 4.25%-4.5% target to below 1%.
The pressure on the Fed intensified further after disappointing US jobs data for August. According to the Daily Mail, official figures revealed that the economy added only 22,000 jobs last month, far fewer than analysts had expected. The weak report immediately fueled speculation that the Fed would be forced to cut rates at its upcoming meeting on September 16-17, prompting an initial rally in Wall Street stocks before fears of a recession sent markets into reverse. In the wake of the jobs report, Treasury Secretary Scott Bessent demanded an “honest, independent, nonpartisan review of the entire institution,” including its power to set interest rates. This call for a sweeping review is just the latest in what the Daily Mail described as a “relentless series of attacks” on the Fed from the Trump administration.
The international response has been swift and pointed. Bank of England Governor Andrew Bailey described the administration’s attacks on the Fed as a “very serious situation,” echoing Lagarde’s concerns about the potential consequences of political interference. Both central bankers stressed that the independence of monetary policy is a cornerstone of economic stability, and history offers sobering lessons about what can happen when that independence is eroded.
Markets, meanwhile, have responded in dramatic fashion. As reported by Moneyweb, gold prices soared to fresh record highs above $3,500 an ounce this week, outpacing global stocks, most commodities, and even Bitcoin. The rally has been fueled by growing expectations that the Fed will soon begin cutting interest rates, alongside mounting worries about the global economy and a weakening US dollar. Johan Jooste, CEO of Pangaea Wealth AG, told Moneyweb, “Policy volatility is off the charts, and it’s especially emanating from the White House. The policies look to be either accidentally or deliberately dollar-weakening, which is a positive for gold.”
Trump’s push to lower borrowing costs—ostensibly to stimulate growth and reduce the government’s debt burden—has had ripple effects across financial markets. Short-term Treasury yields have dropped to four-month lows as investors bet on imminent rate cuts, while 30-year yields remain stubbornly high. Alexandre Carrier, portfolio manager at DNCA Invest Strategic Resources Funds, observed, “The safe-haven assets used to be US dollar assets, but they’re looking less and less of a safe haven now. As a default, gold looks like one of the last safe havens.”
Analysts are now forecasting that gold could climb even higher if the Fed delivers three or four rate cuts by the end of 2025, with some predicting prices could reach $4,000 an ounce by late 2026. Rajeev De Mello, global macro portfolio manager at GAMA Asset Management SA, said, “I’ve shifted my view quite significantly to become more bullish gold, mainly on the back of the Fed’s independence loss.” The Jackson Hole symposium, where Powell signaled a dovish tilt, only strengthened this sentiment, spurring increased investment in gold-backed exchange-traded funds (ETFs).
Despite the bullish sentiment, there remains a risk that Trump could back down if the economic fallout from his campaign against the Fed becomes too severe. Still, as Moneyweb notes, economic gauges are already pointing to a slowdown in hiring, and Trump’s sweeping “One Big Beautiful Bill” tax-cut package is expected to widen the US deficit by $3.3 trillion over the next decade. This fiscal outlook has heightened concerns about America’s ability to keep borrowing at current rates, especially if inflation takes off and confidence in the dollar erodes.
On Wall Street, the mood is far from panicked, but the consensus is shifting. UBS Group AG recently declared gold “back on top” as it raised its price target, while Citigroup and Goldman Sachs have also issued bullish forecasts, citing strong central-bank demand and diversification away from the dollar. As Jerry Prior of Mount Lucas Management LP put it, “We’re in early days of rates going lower, and those expectations can move pretty quickly.”
For now, the fate of the Fed’s independence—and by extension, the stability of the global financial system—hangs in the balance. With Trump “laser focused” on cutting rates and reshaping the central bank’s leadership, all eyes are on the upcoming Fed meeting and the courts’ response to the attempted ouster of Lisa Cook. As Lagarde and Bailey have warned, the stakes could hardly be higher.
In this climate of uncertainty, investors, policymakers, and ordinary Americans alike are left to wonder: Will the world’s most powerful central bank remain a bulwark of stability, or is it on the cusp of a new era defined by political interference and volatility?
