By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said political attacks on central bank independence ultimately backfire, arguing that recent pressure on the Federal Reserve had triggered a flight from US assets and the dollar rather than delivering any durable policy gain.

Nagel, who heads the Deutsche Bundesbank, said in a speech honoring former ECB Chief Economist Otmar Issing that both theory and empirical research continued to show central bank independence as crucial to price stability, while warning that legal protections alone were not enough.

“My takeaway is clear: central bank independence remains crucial for price stability,” he said.

Drawing on new Bundesbank research into renewed attacks on the Fed since early 2025, Nagel said markets responded to political pressure not with confidence but with alarm. Treasury yields fell, he said, but equities also dropped, volatility rose, gold prices climbed and the dollar weakened.

“The main takeaway is clear: when markets believe political pressure is undermining the Fed’s independence, this triggers a flight from US assets and the dollar,” he said.

In Nagel’s account, that reaction suggested investors were less concerned about a burst of inflation than about institutional erosion and the broader economic damage that could follow from it. The implication, he said, was that recent attacks on the Fed had proved more severe than those seen during Donald Trump’s first term.

“Yet it serves as a fresh reminder: attacks on central bank independence backfire,” he said.

More broadly, Nagel argued that the literature pointed to three conditions for independence to deliver price stability: legal independence, actual independence and broad societal support for low inflation. Without that wider “stability culture,” he suggested, formal safeguards could prove insufficient.

The Bundesbank president used the occasion to praise Issing for helping embed independence and price stability in the Eurosystem’s institutional design. He also warned that central bank independence was “not self-sustaining” and depended on officials prepared to defend it.