Global central banks issue a joint statement: Defending central bank independence, "fully supporting" Powell!

After unprecedented pressure from the Trump administration on the Federal Reserve, global central bank governors have come out in support of Federal Reserve Chairman Powell. Faced with the threat of criminal charges against the US monetary authority, central bank chiefs, including those of the European Central Bank, the Bank of England, and the Bank of Canada, have stated that they are "fully united" with the Federal Reserve and Powell. Powell himself has recently taken a tough stance. After President Trump complained for months about high interest rates, Powell accused him of trying to take control of monetary policy. In a statement on Tuesday, the central bank governors said, "The independence of central banks is in the interest of the citizens we serve, and is the cornerstone of price, financial, and economic stability. Therefore, maintaining this independence is essential under the full respect for the rule of law and democratic accountability." The statement was jointly issued by the governors of the European Central Bank, the Bank of England, the Central Bank of Sweden, the Board of Directors of the National Bank of Denmark, the Chair of the Governing Board of the Swiss National Bank, the Chair of the Reserve Bank of Australia, the Governor of the Bank of Canada, the Governor of the Bank of Korea, the Governor of the Central Bank of Brazil, the Chair of the Bank for International Settlements Board of Directors, the General Manager of the Bank for International Settlements, and the Governor of the Central Bank of Norway. This coordinated response highlights the growing concern globally that the monetary autonomy of the world's most important central banks is being actively eroded. Such collective actions are typically reserved for emergencies such as the 2008 financial crisis and global pandemics, rather than for defending a single central bank official. Simona Dale-Giai, Chief Economist of Bloomberg Eurozone, said, "It is extremely rare for central banks to speak with one voice. But the message being conveyed is very clear: this is not just about one person, but about maintaining the independence of the Federal Reserve - the foundation of credible and effective monetary policy." The Federal Reserve received a grand jury subpoena from the Department of Justice and faces the threat of criminal charges - Powell said this action is related to his testimony to Congress last June on the Federal Reserve headquarters renovation. He said, "This move should be seen in the context of government threats and continued pressure." In a written and video statement on Sunday, Powell said, "The threat of criminal charges is because the Federal Reserve sets rates based on our best assessments for the public interest, not to conform to the President's preferences." Jose Manuel Gonzalez-Paramo, Economics Professor at IESE Business School and former ECB official, said, "What is happening is a threat not only to Powell, but to his successor and all members of the Federal Open Market Committee (FOMC). This means that officials identified as violating the President's preferences are at risk of being targeted, humiliated, and subject to various institutional investigations." He believes that, considering the international status of the US dollar, this also poses a risk to financial stability. The absence of some central bank governors has raised concerns. In the G7, Bank of Japan Governor Haruhiko Kuroda did not sign. The Bank of Japan's media relations department said in a statement that the bank "will not comment on the response of other central banks." Gil Mork, Chief Economist at Invesco, said, "The Bank of Japan has always held a vague attitude towards the independence of the central bank, although it is technically independent. There is a consensus within the institution that the government has views on monetary policy and that the Bank of Japan should listen." Even before the joint statement was issued on Tuesday, the role of the Federal Reserve and the US dollar as anchors of the global financial system had prompted some to comment. Bank of Canada Governor Tiff Macklem expressed "full support" for Powell on Monday, saying he "embodies the highest standard of public service." In an email, Macklem said, "Chair Powell has done an exceptional job leading in a difficult environment, guiding the Federal Reserve to make monetary policy decisions based on evidence rather than politics." Other central bank governors, including Lagarde, have also emphasized the importance of monetary policy independence and defended and praised Powell. German Bundesbank President Joachim Nagel said this week that central bank independence is "a prerequisite for price stability and a valuable asset." He said, "Against this backdrop, recent developments regarding the Federal Reserve Chairman are concerning." Indian Reserve Bank Governor Shaktikanta Das did not participate in the joint statement above, but he emphasized the importance of maintaining central bank autonomy when asked about Powell on Tuesday. Governor Shaktikanta Das told the media, "Independence is very important," adding that separating monetary policy from the government is crucial. He said, "This is something that all our jurisdictions need to collectively defend. Hopefully, things will improve over time." Trump has repeatedly called for significant rate cuts, arguing that the Federal Reserve should act to improve housing affordability and reduce government borrowing costs. In a news interview on Sunday, the US president denied knowledge of the Justice Department investigating the Federal Reserve. White House Press Secretary Caroline Levitt told reporters on Monday that the president did not order the investigation and defended the president's right to criticize the central bank.