Leading central bankers from Europe to Asia have voiced firm support for Federal Reserve Chair Jerome Powell, backing his defense of monetary independence as the U.S. Justice Department ramps up its investigation into his congressional testimony.
On Tuesday, a coalition of the world's most influential central bankers issued a rare joint statement backing Powell, warning that political interference in monetary policy threatens not just U.S. credibility, but global financial stability.
Foreign Central Banks Speak Out
"We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell," said European Central Bank President Christine Lagarde on behalf of twelve central banks.
Signatories included Andrew Bailey, governor of the Bank of England; Erik Thedéen, governor of Sweden's Riksbank; Martin Schlegel, chairman of the Swiss National Bank; Tiff Macklem, governor of the Bank of Canada; and Michele Bullock, governor of the Reserve Bank of Australia.
They were joined by Chang Yong Rhee, governor of the Bank of Korea; Gabriel Galípolo, governor of Brazil's central bank; Ida Wolden Bache, governor of Norway's Norges Bank; and Christian Kettel Thomsen, chairman of Danmarks Nationalbank, alongside senior leadership from the Bank for International Settlements.
Calling Powell "a respected colleague held in the highest regard," the group indicated that central bank independence "is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve."
A Global Response To A Domestic Conflict
The statement followed Powell's unusually defiant remarks on Jan. 11, when he directly linked the DOJ criminal investigation into his congressional testimony to broader political efforts to undermine the Fed's independence.
That investigation—focused on renovation costs at the Fed's Washington headquarters—has intensified an already fraught relationship between the White House and the central bank.
U.S. officials, including White House economic adviser and potential Fed chair Kevin Hassett, have maintained that the investigation has nothing to do with interest-rate policy.
International counterparts, however, signaled clear skepticism.
Markets, For Now, Are Not Panicking
Despite the political noise, economists indicate that the Fed's policy path remains largely intact. "The criminal investigation into Federal Reserve Chair Jerome Powell is unlikely to influence the path for monetary policy, and could even backfire," wrote Bernard Yaros, lead U.S. economist at Oxford Economics.
Yaros said Fed officials may now be more reluctant to cut rates, to avoid any appearance of bowing to political pressure.
He reaffirmed a base case of two rate cuts this year—one in June, one in September—assuming inflation eases and growth stays solid.
Markets appear to share that view. An in-line December inflation print on Tuesday helped calm nerves, allowing Wall Street to extend its advance to new highs while Treasury yields retraced Monday's politically driven surge tied to renewed pressure on the Federal Reserve.
The Vanguard S&P 500 ETF (NYSE:VOO) and the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) climbed to record levels, while the tech-heavy Invesco QQQ Trust (NASDAQ:QQQ) now sits less than one percentage point below its all-time high.
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