Federal Reserve Chair Jerome Powell holds a press conference in December. The Trump administration threatened to indict Powell on Sunday.Kevin Lamarque/Reuters
The chiefs of many of the world’s major central banks issued a joint statement in support of Federal Reserve chair Jerome Powell on Tuesday, after the Trump administration threatened him with a criminal indictment.
Powell is at the centre of a U.S. administration’s criminal probe about the renovation of the Fed’s headquarters, which he called a “pretext” to win presidential influence over interest rates.
The heads of the Bank of Canada, European Central Bank, the Bank of England and eight other institutions said Powell had acted with integrity and that central bank independence was crucial for keeping prices and financial markets stable.
“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,” the central bankers said in a rare 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.”
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The U.S. probe has already drawn criticism from the world of finance and also some key members of Trump’s Republican Party.
Central bankers fear that political influence over the Fed would erode trust in the bank’s commitment to its inflation target. This would lead to higher inflation and global financial market volatility.
Since the U.S. is the world’s dominant economy, it would likely export this higher inflation via financial markets, making it more difficult for other central banks to keep prices stable.
“It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability,” the group of central bankers said.
It included the central bank chiefs of Sweden, Denmark, Switzerland, Australia, South Korea, Brazil and France, as well as the chair of the Bank for International Settlements, an umbrella body.
A source said before the statement was published that all central bankers would be welcome to join later.