Global central banks have issued an extraordinary joint statement offering “full solidarity” to the US Federal Reserve chair, Jerome Powell, in the face of the latest threat to his independence.
President Donald Trump has repeatedly criticised Powell, whom he appointed in 2018, for failing to cut interest rates fast enough.
However, the clash between the two men took a dramatic turn earlier this week when Powell issued a strongly worded video statement, saying he was being prosecuted by the US Department of Justice.
He called the move “unprecedented action [that] should be seen in the broader context of the administration’s threats and ongoing pressure” over monetary policy.
He said that he had been singled out because the Fed’s policymaking board had set interest rates “based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Powell and his colleagues have cut interest rates three times since last summer, but Trump has urged it to move faster, and personally attacked Powell as a “numbskull.”
The Department of Justice has said that the case relates to “abuse of taxpayer dollars” – understood to be in relation to costly renovations at the Fed’s headquarters.
The statement expressing solidarity to Powell was signed by Central Bank Governors including the Bank of England Governor, Andrew Bailey, and the Chair of the European Central Bank, Christine Lagarde.
It was coordinated by the Basel-based Bank for International Settlements, which added its Chair and General Manager to the signatories.
Other signatories to the unprecedented statement include the Central Bank Governors of Australia, Sweden, Denmark, Switzerland, Brazil, South Korea and Canada. More names are expected to be added later today.
The statement asserted that the independence of Central Banks is a cornerstone of price, financial and economic stability “in the interest of the citizens that we serve.”
The statement added that it is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.
The signatories pointed out Powell’s “integrity” and “unwavering commitment to the public interest,” calling him a “respected colleague who is held in the highest regard by all who have worked with him.”
Jeanine Pirro, the pro-Trump Attorney General for the District of Columbia, who launched the investigation, claimed in a post on X on Monday night that the “legal process” was “not a threat” to Powell.
“The word ‘indictment’ has come out of Mr Powell’s mouth, no one else’s. None of this would have happened if they had just responded to our outreach.”
Jeanine Pirro
The former Fed Chairs Alan Greenspan, Ben Bernanke and Janet Yellen already condemned the threat to Powell yesterday, saying that the move could have “highly negative consequences.”
Their statement said that this is how monetary policy is made in “emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly.”
Powell Due To Step Down In May
Powell is due to step down as Chair of the Fed board in May, and Trump is expected to announce his successor in the coming weeks.
However, the prospect of legal action has sparked concern among some Republican lawmakers.
Thom Tillis of North Carolina, who sits on the Senate banking committee that oversees Fed appointments, said that he would not confirm any nominee “until this legal matter is fully resolved.”
Meanwhile, Fiona Cincotta, senior market analyst at City Index, noted that the ongoing concerns about Federal Reserve independence have put pressure on the dollar this week.
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