Central banks around the world have joined together to declare “full solidarity” with the Federal Reserve chairman after the United States launched a criminal investigation into Jerome Powell.
The governors of the Bank of England, the European Central Bank and the Bank of Canada are among 11 senior bankers who signed a statement emphasizing the importance of independence in setting interest rates.
“Chairman Powell has served with integrity, focused on his duties and with an unwavering commitment to the public interest,” they said.
The Justice Department is conducting an investigation. President Donald Trump said he “knew nothing” about the investigation.
The investigation is linked to testimony Powell provided to a Senate committee about renovations to the Federal Reserve building.
It follows a year of relentless attacks on the Federal Reserve chairman by President Trump, who has pressured the Fed to more aggressively lower borrowing costs.
Not only did President Trump criticize Powell’s decisions on interest rates, he also made personal comments, calling the Federal Reserve chairman a “big loser” and an “insensitive bastard.”
“For us, he is a respected colleague who enjoys the utmost respect from all who have worked with him,” the global central banks said in a joint statement about the Federal Reserve chairman.
Until the weekend, Powell had remained largely silent about Trump’s attacks, but on Sunday he publicly backed down and warned that the independence of the U.S. central bank was at stake.
“It’s about whether the Fed can continue to set interest rates based on evidence and economic conditions, or whether monetary policy will be determined by political pressure or threats,” Powell said.
The Federal Reserve has cut interest rates three times since September, maintaining the benchmark lending rate at 3.6%.
But policymakers are divided about what to do next. Some worry that further cuts could fuel continued bubble inflation.
Official figures released on Tuesday showed consumer prices rose 2.7% in the 12 months to December. This was the same rate as in November and remained above the Fed’s 2% target.
“The independence of central banks is the cornerstone of price, financial and economic stability for the benefit of the citizens we serve,” the international financial institutions said in a joint statement Tuesday.
“It is therefore important that we maintain our independence while fully respecting the rule of law and democratic accountability.”
Chairman Powell, whom President Trump nominated as Federal Reserve Chairman during his first term in the White House in 2017, is scheduled to resign in May.
President Trump is expected to nominate a successor in the coming weeks.
Several Republicans have spoken out against the Justice Department’s action against the Federal Reserve.
Senator Thom Tillis, a Republican on the Senate Banking Committee, said he would oppose Trump and other candidates for the Federal Reserve Board’s nomination to replace Powell until the issue is “fully resolved.”
Because the committee must approve the next Federal Reserve nominee, if Tillis keeps his promise, it could delay Trump’s nomination to replace Powell.
Senator Kevin Cramer, his Republican colleague on the committee, said he thought Powell was a terrible Fed chairman but did not believe he was a criminal. He added that the investigation must be swift to restore confidence in the Federal Reserve.
Another Republican senator, Lisa Murkowski, called the investigation “an attempt at coercion.”
Chairman Powell has received support from three former Federal Reserve chairs: Janet Yellen, Ben Bernanke, and Alan Greenspan. Other prominent former officials have also publicly declared their support for him and the bank’s independence.
Powell’s immediate predecessor, Yellen, said the criminal investigation was “very appalling” and added that investors should be concerned.
“We have a president who says the Fed needs to cut interest rates to lower interest payments on federal debt. This is the path to a banana republic,” she told CNBC.
The full signatories are:
- Andrew Bailey, Governor of the Bank of England
- Christine Lagarde, President of the European Central Bank
- Erik Thedéen, Governor of the Swedish Riksbank
- Christian Kettel Thomsen, Chairman of the National Bank of Denmark
- Martin Schlegel, Chairman of the Swiss National Bank
- Michelle Bullock, Governor of the Reserve Bank of Australia
- Tiff McClem, Governor of the Bank of Canada
- Bank of Korea Governor Lee Chang-yong
- Gabriel Gallipolo, Governor of the Central Bank of Brazil
- François Villeroy de Galhau, Chairman of the Bank for International Settlements
- Pablo Hernández de Cos, General Manager, Bank for International Settlements
