World Central Bank Chiefs Rally Behind Fed Chair Powell
Global central banks back Jerome Powell after a DOJ investigation, warning that central bank independence and Fed credibility are under serious threat.
Central banks around the world have joined forces to declare their "full solidarity" with Federal Reserve Chairman Jerome Powell after the US launched a criminal investigation into him.
The heads of the Bank of England, the European Central Bank, and the Bank of Canada were among 11 senior bankers who signed a statement emphasizing the importance of independence in setting interest rates.
They said, "Chairman Powell has served with integrity, focused on his work, and demonstrated an unwavering commitment to the public interest."
The Justice Department is investigating. President Donald Trump has stated that he knows "nothing" about the probe.
The investigation relates to Powell's testimony to a Senate committee regarding the renovation of Federal Reserve buildings.
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This follows a year of sustained attacks by Trump on the Fed Chairman.
In addition to criticizing Powell's decisions on interest rates, Trump has also made personal comments, calling the Fed Chairman a "big loser" and an "idiot."
Commenting on the Fed Chairman, global central bankers said in their joint statement: "For us, he is a respected colleague who is highly respected by all who have worked with him."
Until the weekend, Powell had remained largely silent in the face of Trump's attacks, but on Sunday, he publicly hit back and warned that the US central bank's independence was at stake.
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"It's about whether the Fed will be able to continue setting interest rates based on evidence and economic conditions, or whether monetary policy will instead be guided by political pressure or threats," Powell said. In their joint statement on Tuesday, senior financial institutions said: "The independence of central banks is the foundation of price, financial, and economic stability for the benefit of the citizens we serve.
"Therefore, it is crucial to maintain that independence, while fully respecting the rule of law and democratic accountability."
Powell, whom Trump nominated as Fed Chair in 2017 during his first term in the White House, is due to step down in May.
Trump is expected to name his successor in the coming weeks.
Many Republicans have opposed the Justice Department's action against the Fed.
Senator Thom Tillis of North Carolina, a Republican and member of the Senate Banking Committee, said he would oppose Trump's nomination of Powell's replacement and any other nominees to the Fed Board until the matter is "fully resolved."
The committee must approve the next Fed nominee, so if Tillis keeps his promise, it will The nomination of anyone chosen by Trump to replace Powell could be delayed.
His Republican colleague on the committee, Senator Kevin Cramer, said he believed Powell was a bad Fed chairman, but he did not believe he was guilty. He said that to restore confidence in the Fed, the investigation should be swift.
Another Republican senator, Lisa Murkowski, called the investigation "an attempt to coerce."
Powell has also received the support of three former Fed chairmen – Janet Yellen, Ben Bernanke, and Alan Greenspan. Several other prominent former officials have publicly declared their support for him and the bank's independence.
Yellen, who served as Powell's immediate predecessor, called the criminal investigation "extremely scary" and said investors should be concerned.
"You have a president who says the Fed should lower rates to lower interest payments on federal debt... This is the way of the Banana Republic."
The signatories in full are:
- Andrew Bailey, governor of the Bank of England
- Christine Lagarde, president of the European Central Bank
- Erik Thedéen, governor of Sveriges Riksbank
- Christian Kettel Thomsen, chairman of the Danmarks Nationalbank
- Martin Schlegel, chairman of the Swiss National Bank
- Michele Bullock, governor of the Reserve Bank of Australia
- Tiff Macklem, governor of the Bank of Canada
- Chang Yong Rhee, governor of the Bank of Korea
- Gabriel Galípolo, governor of the Banco Central do Brasil
- François Villeroy de Galhau, chair of the Bank for International Settlements
- Pablo Hernández de Cos, general manager of the Bank for International Settlements
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