Global central banks have united to express their “full solidarity” with the chair of the Federal Reserve following the initiation of a criminal investigation into Jerome Powell by the US.
Among the 11 high-ranking bankers who signed the statement are the leaders of the Bank of England, the European Central Bank, and the Bank of Canada, underscoring the crucial nature of independence in interest rate setting.
They remarked, “Chair Powell has performed his duties with integrity, adhering to his mandate and showing unwavering commitment to the public good.”
The investigation is being led by the Department of Justice. President Donald Trump stated he had “no knowledge” regarding the inquiry.
The inquiry relates to testimony provided by Powell to a Senate committee concerning renovations to Federal Reserve facilities.
This follows a relentless year of criticism aimed at the Fed chair by Trump, who has urged the Fed to adopt more aggressive practices in reducing borrowing costs.
In addition to criticizing Powell’s interest rate decisions, Trump has made personal remarks, referring to the Fed chair as a “major loser” and a “numbskull”.
Regarding the Fed chair, the international central bankers noted in their joint statement: “For us, he is a valued colleague who is highly esteemed by all who have collaborated with him.”
Until recently, Powell had largely refrained from responding to Trump’s criticisms, but on Sunday, he publicly defended himself, cautioning that the autonomy of the US central bank was in jeopardy.
“This is about whether the Fed can persist in setting interest rates grounded in evidence and economic realities, or if monetary policy will be influenced by political pressure or intimidation,” Powell stated.
Since September, the Fed has lowered interest rates three times, maintaining its key lending rate at approximately 3.6%.
However, there is a split among policymakers regarding the subsequent steps. Some express concerns that further cuts might fuel inflation, which remains persistently elevated.
Consumer prices increased by 2.7% over the year leading up to December, as per official data released on Tuesday. This rate was consistent with November’s figures and exceeded the Fed’s 2% target.
In their collective statement on Tuesday, the global financial institutions emphasized: “Central bank independence is fundamental to price, financial, and economic stability for the benefit of the citizens we represent.”
“It is essential to uphold that independence, while fully respecting the rule of law and democratic accountability.”
Powell, appointed as Fed chair by Trump in 2017 during his initial term, is expected to resign in May.
Trump is likely to announce his successor in the weeks ahead.
Several Republicans have voiced their opposition to the justice department’s actions against the Fed.
Republican Senator Thom Tillis from North Carolina, a member of the Senate Banking Committee, stated he would resist the nomination of Powell’s replacement by Trump, as well as any other Fed Board nominee, until the issue was “completely resolved”.
The committee’s approval is necessary for the next Fed nominee, so if Tillis remains firm in that commitment, it could postpone the nomination of any Trump selection to succeed Powell.
His fellow Republican committee member, Senator Kevin Cramer, remarked that while he believed Powell was not an effective Fed chair, he did not think Powell was a criminal. He suggested that to restore faith in the Fed, the investigation ought to proceed quickly.
Another Republican senator, Lisa Murkowski, characterized the investigation as “an act of coercion.”
Powell has also received support from three former chairs of the Fed – Janet Yellen, Ben Bernanke, and Alan Greenspan. Numerous other distinguished former officials have openly expressed their backing for him and the independence of the bank.
Yellen, who was Powell’s immediate predecessor, described the criminal investigation as “incredibly chilling,” cautioning that investors should be wary.
“You have a president who insists the Fed ought to decrease rates to lessen payments on the federal debt… It is the path to a banana republic,” she commented on CNBC.
The complete list of signatories includes:
- 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
