Central bankers defend Fed’s Powell after Trump threat

The heads of many of the world’s major central banks issued a joint statement supporting Federal Reserve chairman Jerome Powell after the Trump administration threatened him with criminal charges.

Powell is at the center of the US administration’s criminal investigation into the renovation of the Fed headquarters, which he has called an “excuse” to gain presidential influence over interest rates.

The presidents of the European Central Bank, Bank of England, Bank of Canada, Reserve Bank of Australia and eight other institutions said Powell acted with integrity and that central bank independence was crucial to keeping prices and financial markets stable.

“We stand in full solidarity with the Federal Reserve System and its Chairman Jerome H Powell,” central bankers said in a rare joint statement on Tuesday.

“The independence of central banks is the cornerstone of price, financial and economic stability in the interest of the citizens we serve.”

The US investigation has drawn criticism from some prominent members of Trump’s Republican Party, as well as from the financial world.

Central bankers fear that political influence on the Fed will erode confidence in the bank’s commitment to its inflation target. This will lead to higher inflation and volatility in global financial markets.

Since the United States is the world’s dominant economy, it will likely export this higher inflation through financial markets, making it difficult for other central banks to keep prices stable.

“It is therefore critical to preserve this independence with full respect for the rule of law and democratic accountability,” the group of central bankers said.

This group included the central bank governors of Sweden, Denmark, Switzerland, Australia, South Korea, Brazil and France, as well as the head of the Bank for International Settlements, an umbrella body.

Before the statement was published, a source said all central bankers would be welcome to join later.