London (AFP) – The heads of major central banks have thrown their support behind the US Federal Reserve and its chairman Jerome Powell, saying in a joint statement Tuesday that it was “critical to preserve” their independence. US prosecutors have issued subpoenas against Powell threatening a criminal indictment, an unprecedented move widely seen as an escalation of President Donald Trump’s campaign against the central bank. The inquiry prompted a rare public rebuke by Powell on Sunday, who vowed to continue setting monetary policy “without political fear or favor.”
“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,” said Tuesday’s statement from central bank leaders around the world. Its signatories included European Central Bank president Christine Lagarde, Bank of England governor Andrew Bailey, and Rhee Chang-yong, governor of South Korea’s central bank. The statement was not signed, however, by the Bank of Japan.
“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 said. “Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest,” it added. The statement was also signed by the central bank chiefs of Australia, Brazil, Canada, Denmark, Sweden, and Switzerland, as well as the chairman of the Bank for International Settlements.
The US inquiry concerns a $2.5-billion renovation of the Fed headquarters in Washington, which Trump has repeatedly attacked Powell for mismanaging. Last year, Trump floated the possibility of firing Powell over cost overruns for the historic buildings’ facelift. He has also slammed Powell as a “numbskull” and “moron” for the Fed’s policy decisions and not cutting borrowing costs more sharply. In his video statement Sunday, Powell dismissed the renovation and testimony as “pretexts.”
“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,” he said. Powell has received the support also of former Federal Reserve chiefs, who on Monday sharply criticized the criminal probe, calling it an “unprecedented attempt” to undermine the central bank’s independence.
Two Republican senators joined in rebuking the Trump administration and questioned the credibility of the Department of Justice in targeting Powell. Financial markets were meanwhile awaiting the release of US inflation data due Tuesday for clues on the outlook for US interest rates. “After the recent noise around the independence of the Federal Reserve, new inflation data may offer some clarity about whether there is a case for a near-term interest rate cut following mixed (US) jobs numbers last week,” noted Dan Coatsworth, head of markets at AJ Bell trading group. The Fed has already indicated that it will hold interest rates steady at its next monetary policy meeting this month.
© 2024 AFP
