'We stand in full solidarity with Fed': Bailey and Lagarde among 11 central bank chiefs to defend independence after Trump attack on Powell
Bank of England governor Andrew Bailey yesterday joined a global coalition of central bank chiefs rallying to defend the principle of independence after Donald Trump’s attack on the US Federal Reserve.
A statement signed by 11 central bankers also including the European Central Bank’s Christine Lagarde said they stood in ‘full solidarity’ with Fed chief Jerome Powell.
It added to a mounting backlash from the world financial establishment after the Trump administration threatened criminal charges against the Fed – leading to accusations that he is turning America into a ‘banana republic’.
The US Department of Justice probe is ostensibly focused on the Fed’s building renovations but Powell has said it is a pretext for the president to pile on more pressure for faster interest rate cuts.
Powell vowed not to be intimidated and was given full-throated backing yesterday in an extraordinary statement by his international counterparts from Sweden to Brazil.
They said: ‘We stand in full solidarity with the Federal Reserve System and its chair Jerome H. Powell.
Andrew Bailey joined a mounting backlash from the world's financial establishment
‘The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve.
‘It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.
‘Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him.’
It came a day after a separate heavyweight intervention from the US economic establishment – including Powell’s predecessors Alan Greenspan, Ben Bernanke and Janet Yellen – also offering support to the Fed chief and rebuking the Trump administration.
They said the DoJ probe was an attempt to undermine the Fed’s independence on interest rates.
‘This is how monetary policy is made in emerging markets with weak institutions… It has no place in the United States,’ they said.
And speaking to broadcaster CNBC, Yellen said it was ‘the road to a banana republic’.
The row has prompted a fall in the dollar and a rise in the gold price in a ‘sell America’ trade.
Powell’s term ends in May and Trump faces a key decision on his replacement. He has long regretted appointing Powell in 2017 but putting in place a loyalist who will do his bidding could undermine the Fed’s credibility and upset markets.
Trump’s latest move has drawn concern from one Republican senator, Thom Tillis, who said he would oppose any future nominee until the legal matter is resolved.
‘If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,’ he said.
