Central bankers from around the world said Tuesday they “stand in full solidarity” with U.S. Federal Reserve Chair Jerome Powell amid an escalated confrontation with President Donald Trump.
In a statement signed by nine national central bank heads, including European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey, the signatories said Powell “has served with integrity, focused on his mandate and an unwavering commitment to the public interest,” and they added that the independence of central banks is “a cornerstone of price, financial and economic stability” in the public interest.
The central bank heads also said “it is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”
The dispute is ostensibly tied to Powell’s testimony to Congress in June about the cost of a massive renovation of Fed buildings. Trump has repeatedly criticized Powell and the Fed for not moving faster to cut rates, and the Trump administration has escalated the confrontation by involving the Justice Department in a probe and threatening criminal charges, according to the report.
In a statement Sunday, Powell said the administration’s threat of criminal charges were “pretexts” in the president’s campaign to seize control of U.S. interest rate policy from what he described as the Fed’s technocrats.
The report said economists warned that a politicized Fed that “caves in” to the president’s demands would damage the Fed’s credibility as an inflation fighter and could lead investors to demand higher rates before investing in U.S. Treasurys.
Because the dollar is the leading currency used for trade transactions and for central bank reserves, the report said changes in Fed policy have impacts around the world. It said Fed interest rate actions can affect the dollar’s exchange rate against other currencies and the value of foreign investors’ U.S. assets.
The statement said politically independent central banks have become a cornerstone of the global economy because they can take steps to fight inflation—such as rate hikes—even when those moves are unpopular in the short term, while preserving price stability over the longer term.
Beyond Lagarde and Bailey, signatories listed by the report included Erik Thedeen of Sweden; Christian Kettel Thomsen of Denmark; Swiss National Bank chair Martin Schlegel; Michele Bullock of Australia’s central bank; Tiff Macklem of Canada’s central bank; Bank of Korea Governor Chang Yong Rhee; and Gabriel Galipolo of Brazil’s central bank. The report also said François Villeroy de Galhau, board chair of the Bank for International Settlements, and Pablo Hernández de Cos, BIS general manager, attached their names.
One prominent central bank not included, the report said, was the Bank of Japan, and it added that the statement said more signatures could be added later. Bank of Japan officials could not immediately be reached for comment, according to the report.