International central bankers back Fed’s Powell over DoJ investigation
Newsflash: Eleven of the world’s top central bankers have released a statement of support for Federal Reserve chair Jerome Powell, after the US Department of Justice opened a criminal investigation into him.
In an unprecedented move, top central bank chiefs including the Bank of England’s Andrew Bailey, and Christine Lagarde of the European Central Bank, have backed Powell, and warned against undermining central bank independence.
The heads of the Swedish, Denmark, Swiss, Australian, Canadian, South Korean, and Brazilian central banks have also signed, as have two top officials at the Bank of International Settlements (known as the “central bank for central banks”).
Others may yet sign the letter too, Reuters suggested this morning.
The central bank chiefs say:
We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell.
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.
Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him.
The letter is signed by:
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Christine Lagarde, President of the European Central Bank on behalf of the ECB Governing Council
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Andrew Bailey, Governor of the Bank of England
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Erik Thedéen, Governor of Sveriges Riksbank
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Christian Kettel Thomsen, Chairman of the Board of Governors of the Danmarks Nationalbank
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Martin Schlegel, Chairman of the Governing Board of the Swiss National Bank
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Michele Bullock, Governor of the Reserve Bank of Australia
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Tiff Macklem, Governor of the Bank of Canada
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Chang Yong Rhee, Governor of the Bank of Korea
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Gabriel Galípolo, Governor of the Banco Central do Brasil
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François Villeroy de Galhau, Chair of the Board of Directors of the Bank for International Settlements
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Pablo Hernández de Cos, General Manager of the Bank for International Settlements
UPDATE: Here’s the full story on today’s letter.
This is the second show of support for Powell in two days, after his predecessors at the Fed also backed him:
Key events
Liz Truss: central bankers have been a complete failure
Not everyone agrees that central bank independence is a good thing.
Former UK prime minister Liz Truss has criticised the world’s “unaccountable central bankers”, accusing them of being a “complete failure”.
Truss (something of an expert on failure herself) writes:
We’ve had failing technocrats running monetary policy for the last 25 years and it’s been a complete failure. The era of unaccountable central banks has led to our currency being debased, massive expansion of the state and a crisis in housing affordability.
Sovereignty, democracy and accountability needs to be restored.
Fact check. Central bankers aren’t, strictly speaking, unaccountable. They are appointed by politicians, who also set their mandates, and are quizzed by the relevent parliamentary body (Jerome Powell, for example, regularly testifies to Congress, while the BoE’s Andrew Bailey appears before the UK’s Treasury Committee several times a year).
Central bank independence is generally seen as an improvement on the days when governments set the cost of borrowing (allowing them to engineer a boom before an election, followed by a squeeze afterwards).
And the system has generally worked, leading to lower inflation.
As Simon French of City firm Panmure Gordon replied to Truss:
With respect, in the 28 years prior to BoE independence UK inflation averaged 8.3% YoY, and 2.4.% YoY in the 28 years since.
If you missed it yesterday, here’s a video of Jerome Powell revealing that the Department of Justice has served the Federal Reserve with grand jury subpoenas:
Significantly, Fed chair Powell insisted this was a political move, saying:
This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are 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.
Fiona Cincotta, senior market analyst at City Index, says ongoing concerns about Federal Reserve independence have put pressure on the dollar this week.
Cincotta explains:
The U.S. dollar has come under pressure this week, falling sharply yesterday on reports that the U.S. Department of Justice is considering indicting Federal Reserve Chair Jerome Powell over a building renovation project at the Federal Reserve headquarters.
Powell said he considered the threat a pretext to pressure the Fed to lower interest rates. His comments raised concerns about the Federal Reserve’s independence and exerted downward pressure on the U.S. dollar.
The next US inflation report, due at 1.30pm UK time (8.30am EST) today, could also move the dollar, she adds:
Attention will now turn to the US CPI report for further clarity over the Fed’s next move. CPI is expected to hold steady at 2.7% in December, while core CPI is expected to rise to 2.7%, up from 2.6%. Given data-collection issues in the November reading, the US CPI for December could come in hotter than expected.
The market is currently pricing in two rate cuts from the Fed compared to one rate cut guided by the US central bank. Higher-than-expected inflation could prompt the market to rein in expectations for rate cuts, which would boost the US dollar.
Although the US dollar fell yesterday, the news that America’s top central banker was under criminal investigation (a real marmalade dropper) hasn’t caused many serious ructions in the markets.
Yet.
Dario Perkins, MD for global macro at City consultancy TS Lombard, has warned that the independence of central banks shouldn’t be taken for granted, in an age of populism.
Perkins wrote this morning:
The short answer is that the market probably won’t react to Trump’s blatant politicization of the Fed until the economy rebounds and/or inflation returns to the top of investors’ minds.
There are various scenarios where this stuff just won’t matter. But longer term, we shouldn’t take the independence of central banks for granted.
They were a child of post-1990s Neoliberalism – and an obvious target for populists all over the world. Populism and monetary independence don’t mix.
Full story: Global central banks offer ‘full solidarity’ to US Fed’s Powell amid Trump threats
Heather Stewart
Global central banks have issued an extraordinary joint statement offering “full solidarity” to US Federal Reserve chair Jerome Powell, in the face of the latest threat to his independence from Donald Trump’s White House.
“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 said.
Richard Partington
Economists have warned this week that Donald Trump’s attempts to influence the US Federal Reserve could risk plunging America into a period of 1970s-style inflation and trigger a global backlash in financial markets.
Analysts drew parallels with the 1970s when US inflation soared after the then president, Richard Nixon, pressured the then Fed chair, Arthur Burns, to ease monetary policy to help smooth his 1972 election campaign.
Atakan Bakiskan, US economist at Berenberg bank, said:
“If the Fed pursues an ultra-accommodative monetary policy despite higher inflation, the result could resemble the 1970s in a worst-case risk scenario.
“Moreover, if the Fed acts on politics rather than data, foreign investors could pull back on financing the US debt and seek new safe havens.”
Why Federal Reserve attacks worry the markets
The key worry for central bankers, generally, is that inflation expectations shouldn’t get out of control.
That’s why Donald Trump’s criticism of Jerome Powell over many months could be dangerous – investors could conclude that Powell’s successor will be influenced by the whims of the White House, and cut interest rates too much, letting inflation rear out of control.
Susannah Streeter, chief investment strategist at Wealth Club, explains:
The big worry is that if the Fed is bowed to do the President’s bidding, there will no longer be a razor-sharp focus on ensuring inflation does not veer out of control. Today’s core inflation numbers for December in the US will be under intense scrutiny.
There are already signs of persistent inflationary pressure, with the data expected to show a slight tick up in price rises to an annual rate of 2.7% from 2.6% in November, veering further away from target. If it overshoots expectations, it could dampen enthusiasm for equities given that further interest rate cuts could be delayed. But it seems in Trump’s wishful world, the Fed would keep lowering borrowing costs despite runaway inflation risks, which is why there’s so much unease around about US future monetary policy.’’
International central bankers back Fed’s Powell over DoJ investigation
Newsflash: Eleven of the world’s top central bankers have released a statement of support for Federal Reserve chair Jerome Powell, after the US Department of Justice opened a criminal investigation into him.
In an unprecedented move, top central bank chiefs including the Bank of England’s Andrew Bailey, and Christine Lagarde of the European Central Bank, have backed Powell, and warned against undermining central bank independence.
The heads of the Swedish, Denmark, Swiss, Australian, Canadian, South Korean, and Brazilian central banks have also signed, as have two top officials at the Bank of International Settlements (known as the “central bank for central banks”).
Others may yet sign the letter too, Reuters suggested this morning.
The central bank chiefs say:
We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell.
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.
Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him.
The letter is signed by:
-
Christine Lagarde, President of the European Central Bank on behalf of the ECB Governing Council
-
Andrew Bailey, Governor of the Bank of England
-
Erik Thedéen, Governor of Sveriges Riksbank
-
Christian Kettel Thomsen, Chairman of the Board of Governors of the Danmarks Nationalbank
-
Martin Schlegel, Chairman of the Governing Board 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 Board of Directors of the Bank for International Settlements
-
Pablo Hernández de Cos, General Manager of the Bank for International Settlements
UPDATE: Here’s the full story on today’s letter.
This is the second show of support for Powell in two days, after his predecessors at the Fed also backed him:
China ‘firmly opposes’ Trump’s Iran tariffs threat
China has criticised Donald Trump’s threat of new 25% tariffs on companies doing business with Iran.
Liu Pengyu, the spokesperson for the Chinese Embassy in the US, said China’s position against the “indiscriminate imposition of tariffs is consistent and clear”, adding:
Tariff wars and trade wars have no winners, and coercion and pressure cannot solve problems. Protectionism harms the interests of all parties.
China firmly opposes any illicit unilateral sanctions and long-arm jurisdiction, and will take all necessary measures to safeguard its legitimate rights and interests.
Overnight, the United States attorney for the District of Columbia defended her decision to issue the Federal Reserve with subpoenas last week.
Jeanine Pirro posted on X that the Fed had ignored previous contact over its renovation project, writing:
The United States Attorney’s Office contacted the Federal Reserve on multiple occasions to discuss cost overruns and the chairman’s congressional testimony, but were ignored, necessitating the use of legal process—which is not a threat.
The word “indictment” has come out of Mr. Powell’s mouth, no one else’s. None of this would have happened if they had just responded to our outreach.
This office makes decisions based on the merits, nothing more and nothing less. We agree with the chairman of the Federal Reserve that no one is above the law, and that is why we expect his full cooperation.
The United States Attorney’s Office contacted the Federal Reserve on multiple occasions to discuss cost overruns and the chairman’s congressional testimony, but were ignored, necessitating the use of legal process—which is not a threat.
The word “indictment” has come out of Mr.…
— US Attorney Pirro (@USAttyPirro) January 13, 2026
