(Jan 13): Global central bank officials are working on a statement to show solidarity with chair Jerome Powell after the Trump administration dramatically escalated its pressure campaign towards the US Federal Reserve (Fed), according to a person familiar with the matter.
The joint statement is expected to be issued under the Bank for International Settlements (BIS) banner and will be open for all central banks to sign, said the person, who asked not to be identified. The statement could come as early as Tuesday as monetary chiefs take time to sort the language due to time-zone differences, the person said.
The BIS didn’t have an immediate comment when contacted by Bloomberg.
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. In a rare push back, he said the move “should be seen in the broader context of the administration’s threats and ongoing pressure”.
“The threat of criminal charges is a consequence of the Fed setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said in a written and video statement released on Sunday evening.
The unprecedented threat of legal action has sharpened concerns that political pressure could weaken central bank independence, raising longer-term risks that monetary policy becomes constrained by political imperatives rather than inflation and growth objectives. The Fed and the US dollar are anchors of the global financial system, meaning rhetorical pressure, let alone threats of legal action, carries global significance.
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Bank of Canada governor Tiff Macklem on Monday issued a statement offering 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 in an emailed statement to Bloomberg.
Other central bank chiefs — including European Central Bank president Christine Lagarde — have repeatedly highlighted the importance of monetary-policy independence and defended and praised Powell.
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US President Donald 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 with NBC News on Sunday, Trump denied having any knowledge of the Department of Justice’s investigation into the US central bank.
White House Press Secretary Karoline Leavitt told reporters on Monday that the president had not ordered the investigation and defended his right to criticise the central bank.
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