Washington: Global central bankers threw their support behind Chairman Jerome Powell after the Trump administration ratcheted up its already unprecedented pressure campaign against the Federal Reserve.
Reacting to the threat of criminal charges being leveled at the US monetary authority, central bank chief including those at the European Central Bank, Bank of England and the Bank of Canada said they “stand in full solidarity” with the Fed and Powell.
Powell himself has also adopted a combative tone in recent days, accusing Donald Trump of seeking to wrest control over monetary policy after the president spent months complaining interest rates are too high.
“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,” the central bankers said Tuesday in a statement. “It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”
The coordinated response underscores growing alarm that monetary autonomy within the world’s most important central bank is being actively dismantled. Such collective action has usually been reserved for global emergencies like the 2008 crash and the pandemic — not the defense of an individual central banker.
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“It’s extremely rare for central banks to speak with one voice. The message is loud and clear: This is not just about one person, but about protecting the Fed’s independence — the foundation of credible and effective monetary policy.”
—Simona Delle Chiaie, chief euro-area economist.
The Fed was served grand jury subpoenas from the Justice Department threatening a criminal indictment — an action Powell said is related to his June congressional testimony on renovations of the Fed’s headquarters. The move “should be seen in the broader context of the administration’s threats and ongoing pressure,” he said.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said Sunday in a written and video statement.
Some central bankers were notable by their absence from the statement. Among the Group of Seven, Bank of Japan Governor Kazuo Ueda didn’t sign.
The BOJ refrains “from commenting on the responses of other central banks,” the media relations division told Bloomberg in a statement.
While most other central bank chiefs from within the Group of 10 most-traded currencies were on the list, Reserve Bank of New Zealand head Anna Breman was missing too. An email seeking comment from the RBNZ outside of office hours wasn’t immediately answered.
Even before Tuesday’s statement, the role of the Fed and the US dollar as anchors of the global financial system had already prompted some to weigh in.
BoC Governor Tiff Macklem on Monday offered his “full support” to Powell, saying he “reflects the very best in public service.”
“Chair Powell is doing a very good job under difficult circumstances, guiding the Fed to take monetary policy decisions based on evidence, not politics,” Macklem said by email.
Other central-bank chiefs — including Lagarde — have repeatedly highlighted the importance of monetary-policy independence and defended and praised Powell.
Bundesbank President Joachim Nagel this week called central-bank independence “a prerequisite for price stability and a valuable asset.”
“Against this backdrop, the latest developments in the US regarding the Fed chair are cause for concern,” he said.
Responding later Tuesday to a question about Powell, the head of the Reserve Bank of India — who wasn’t part of the joint statement — stressed that it’s important to preserve central banks’ autonomy.
“Independence, of course, is very important,” Governor Sanjay Malhotra told NDTV, adding that it’s important to separate monetary policy from government.
“That is something that we need to all collectively, across jurisdictions, preserve,” he said. “Hopefully, that should only improve over the years.”
Trump has repeatedly called for aggressive rate cuts, arguing the Fed should be acting to boost housing affordability and ease the government’s borrowing costs. In an interview Sunday with NBC News, the US president denied having any knowledge of the DOJ’s investigation into the central bank.
White House Press Secretary Karoline Leavitt told reporters Monday that the president hadn’t ordered the probe and defended his right to criticize the central bank.
–With assistance from Ott Ummelas, Bastian Benrath-Wright, Alexander Weber, Christopher Condon, Malcolm Scott, Toru Fujioka, Stephen Treloar and Anup Roy.
Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.
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