(Jan 20): Bank of England (BOE) governor Andrew Bailey warned of the “substantial” threat of spillovers from US President Donald Trump attacking the independence of the Federal Reserve.
Bailey said on Tuesday that an intervention by other central banks in support of Fed Chair Jerome Powell was “pretty unprecedented” but was needed given the US’s global influence.
“There is very substantial scope for spillover,” he told lawmakers on Parliament’s Treasury Committee. “There are substantial externalities and potential spillovers from things that go on in the US, and particularly, I would say from a threat to the independence of the Federal Reserve.”
The Fed was served grand jury subpoenas from the Justice Department threatening a criminal indictment earlier this month, the latest attack by the Trump administration on the US central bank. The BOE was one of the central banks to sign a statement in support of Fed chief Jerome Powell, saying they “stand in full solidarity”.
Bailey told lawmakers he was not seeing the same threats to the UK central bank in domestic politics.
Bailey said that growth and markets have been more stable than expected despite growing geopolitical tensions since Trump returned to power. European stock markets fell sharply for a second day on Tuesday amid the standoff between the US and Europe over Greenland.
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“The level of geopolitical uncertainty and the level of geopolitical issues is obviously a big consideration,” Bailey said.
While he said the market reaction to climbing geopolitical risks has been more muted than expected, Bailey added he is not reassured by that.
Uploaded by Evelyn Chan
