By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said on Thursday that the US government's attacks on the Federal Reserved increased risks to the outlook as lower central bank independence would likely raise inflation in the US.

In an interview with Reuters, Kazāks, who heads Latvijas Banka, said that risks to the outlook increased after US President Trump’s threats to the Fed.

“Risks are on both sides and there's no room for complacency,” he said. “We've seen a lapse into emerging market politics in the US and there are risks from an AI-hype-driven valuation in the US financial markets.”

He said that a less independent Fed was likely to trigger higher consumer inflation in the US and that would in turn lead to higher interest rates.

China’s government subsidies, controls on rare earth exports and an exchange rate stance seen as restraining the yuan’s strength could breach World Trade Organisation rules, he said.

Interest rates were at an appropriate level and inflation developments were positive, he said, citing core inflation now standing closer to the 2% target.

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