Powell difends Fed's stance, Lagarde warns on dollar and stablecoins

The annual central bank symposium in Sintra, Portugal, focused heavily on U.S. trade policy and its global repercussions, with Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde offering contrasting yet critical takes on the current economic climate.

Unlike in past events, Powell faced little criticism from peers and was even applauded for his composed response to U.S. President Donald Trump's repeated calls to cut interest rates. Speaking at the forum, Powell said the U.S. economy is "in a pretty good place," with a "generally healthy" labor market and inflation evolving "more or less as expected and hoped."

While acknowledging that tariffs have yet to significantly impact the data, Powell emphasized the Fed is "watching carefully" and confirmed the central bank would not proceed with a rate cut in July, despite earlier indications. “All U.S. inflation forecasts have been revised upward due to tariffs,” he said. “We’re simply taking our time, trying to learn more, and waiting to see the effects.”

Responding to Trump’s criticism — including threats to replace him — Powell maintained a calm stance: “I’m very focused on my job,” reiterating the Fed’s commitment to “maximum employment, price stability, and financial stability.”

Asked if he would remain at the Fed beyond his chairmanship term, Powell declined to answer, instead reaffirming his goal: “All I want — and what everyone at the Fed wants — is to deliver an economy with price stability, maximum employment, and financial stability. What keeps me up at night is: how do we achieve that?”

ECB President Christine Lagarde addressed the sharp drop in the U.S. dollar, which has fallen to its lowest level since 2009 and recorded its steepest first-half decline since the 1973 end of the gold standard. While avoiding direct comment on the EUR/USD exchange rate, she acknowledged that “something has broken,” pointing to waning trust in U.S. economic leadership.

“The exchange rate reflects, among other things, the strength of the European economy,” Lagarde said, “but clearly, something has shifted — and that has to do with the loss of credibility in the U.S. administration.”

On digital currencies, Lagarde reiterated her deep skepticism toward stablecoins, which have been publicly supported by Trump. “I fear the blurred lines between money, means of payment, and payment infrastructure,” she said. “This confusion risks the privatization of money and could undermine our ability to conduct monetary policy, weakening the sovereignty of countries or regions inadvertently tied to these systems.”

Powell took a more neutral tone on the issue, noting that while the U.S. currently lacks a comprehensive legal framework for stablecoins, “we are working hard to establish one” and stressed the need for clear “federal regulation.”