(AFP) – The heads of major central banks have thrown their support behind the US Federal Reserve and its chairman Jerome Powell, stating 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.
Asked about Powell on Tuesday, Trump charged that the Fed chief was “billions of dollars over budget.” “So he either is incompetent or he’s crooked, I don’t know what he is,” Trump told reporters. “Certainly, he doesn’t do a very good job.” But pressure from the Trump administration could backfire, warned JPMorgan Chase chief executive Jamie Dimon. “Everyone we know believes in Fed independence,” Dimon told a media conference call. “Anything that chips away at that is probably not a great idea. And in my view it will have the reverse consequences.”
“While I don’t agree with everything the Fed has done, I do have enormous respect for Jay Powell,” he added.
“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,” the international central bankers’ 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 signed also by the central bank chiefs of Australia, Brazil, Canada, Denmark, Norway, 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 accused Powell of 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 his Senate testimony about it, cited in the subpoenas, 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 separately received the support of former Fed 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.
Wall Street’s major indexes meanwhile pulled back as investors digested US consumer inflation readings that held steady in December. Analysts noted that the 2.7 percent year-on-year increase likely gives the Fed room to continue lowering rates if the labor market weakens. But they maintained that policymakers would likely wait a few months before doing so as they observe the effects of recent rate cuts.
– Ben PERRY
© 2024 AFP
