Global central bankers speak up for beleaguered Fed Chair Powell

Global central banks rallied behind Federal Reserve Chair Jerome Powell on Tuesday, pushing back against a perceived political attack on the independence of the world’s most important financial institution.

“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,” the officials said in a joint statement. “The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”

The statement was signed by European Central Bank President Christine Lagarde on behalf of the ECB’s Governing Council, by Bank of England Governor Andrew Bailey as well as the heads of the Swiss, Swedish, Danish, Australian, Canadian, South Korean and Brazilian central banks.

Pablo Hernández de Cos, general manager of the Bank for International Settlements and François Villeroy de Galhau, chair of the Board of Directors of the Bank for International Settlements, also signed the statement.

Over the weekend, Powell disclosed that the Fed had been served with grand jury subpoenas by the Department of Justice, raising the threat of a criminal indictment tied to his congressional testimony on the ongoing renovation of the Fed’s Washington headquarters.

In what amounted to a dramatic escalation in the standoff between the White House and the central bank, Powell used an unusually direct video message to argue that the legal action is politically motivated and part of a campaign of “intimidation,” designed to push the Fed into cutting interest rates more aggressively.

“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,” Powell said in language rare in its starkness for a serving Fed chair.

Trump, a longtime critic who has piled personal insults on Powell since his reelection both through ad hoc comments and through his social media feed, denied any role in the investigation. Speaking to NBC News on Sunday, Trump said he was unaware of the probe but added that Powell is “certainly not very good at the Fed, and he’s not very good at building buildings.”

The joint statement on Tuesday took a different view.

“Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest,” it said. “To us, he is a respected colleague who is held in the highest regard by all who have worked with him.”

Expressions of support for Powell from around the world had already begun on Monday, with Bundesbank President Joachim Nagel telling POLITICO that: “The independence of central banks is a prerequisite for price stability and a great public good. Against this background, the recent developments in the U.S. regarding the Fed chairman are cause for concern.” Bank of France Governor Villeroy de Galhau, meanwhile, had told a  new year event at the ACPR regulator that Powell was “a model of integrity and commitment to the public interest.”

POLITICO reported on Monday that the decision to subpoena the Fed had also raised concern among various White House officials, who are concerned that it may trigger volatility in financial markets and complicate efforts to keep the economy on track in an election year. Senior Republican Party lawmakers have also spoken out against the move.