Global central bank chiefs rally behind Fed chair Powell after Trump threat

Central bank chiefs from around the world lined up in support of Federal Reserve Chair Jerome Powell on Tuesday, issuing an unprecedented statement of solidarity after the Trump administration threatened him with a criminal indictment. 

Powell has been threatened with a probe over congressional testimony he gave last summer about the renovation of the Fed’s headquarters, which he has called a “pretext” to win presidential influence over interest rates. 

JPMorgan Chase & Co Chief Executive Officer Jamie Dimon said that the US Justice Department’s attacks on the Fed have the potential to undermine the independence of the central bank and possibly boost borrowing costs. 

“Everyone we know believes in Fed independence,” Dimon said Tuesday. “And anything chips away at that is probably not a great idea. And in my view, will have these reverse consequences. It’ll raise inflation expectations and probably increase rates over time.” 

“I do have enormous respect for Jay Powell, the man,” he said. 

“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H Powell,” the heads of some of the world’s largest central banks said in a rare joint statement. 

Independence from government influence has been the foundation of modern central banking. It remained the unquestioned standard until President Trump started demanding lower rates and putting pressure on individual policymakers when they failed to oblige. 

The heads of the European Central Bank, the Bank of England, the Bank of Canada, and eight other institutions said that Powell had acted with integrity and that central bank independence was crucial for keeping prices and financial markets stable.

“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,” the joint statement said. 

Sources said that ECB President Christine Lagarde, who signed on behalf of the euro zone’s 21 central banks, was the key driver of the joint response, while much of the actual footwork to get individual governors on board was done by Pablo Hernandez de Cos, the general manager of the Bank for International Settlements, a central bank umbrella body. The ECB and the BIS declined to comment. 

Other signatories included the central banks of Sweden, Denmark, Switzerland, Austria, South Korea, Brazil and France, as well as top officials at the BIS. 

The Bank of Japan was notably absent from the list.