Central banks worldwide back Powell in standoff with Trump

Central banks worldwide have shown full unity, rallying behind Jerome Powell in his battle against the Trump administration. They emphasized that central bank independence is a crucial foundation for price stability, financial stability, and overall economic stability.

Bloomberg reports that central bank governors from across the globe expressed support for Federal Reserve Chairman Jerome Powell after the Trump administration applied pressure like never before on the Federal Reserve.

In response to threats of criminal charges against the U.S. financial agency, central bank governors, including the ECB President, the Bank of England, and the Bank of Canada, stated that they stood firmly alongside the Fed and Powell, voicing their full “unity.”

Powell himself has taken a more aggressive stance in recent days, accusing Trump of trying to seize control over monetary policy after the President complained for months about the high interest rates.

“The independence of central banks is the cornerstone of price stability, financial stability, and economic stability for the benefit of the people we serve,” the central bank governors stated in a declaration on Tuesday (January 13). “Therefore, it is critically important to preserve this independence, through full respect for the law and democratic oversight.”

This coordinated response reflects increasing alarm over the systematic undermining of financial independence within the world’s most important central banks. Joint statements of such solidarity are typically reserved for global crises like the 2008 financial crisis or the COVID-19 pandemic, not for defending an individual central banker.

Simona Delle Kiea, Head of Eurozone Economics at Bloomberg Economics, commented, “It is extremely rare for central banks to issue a joint statement. The message is clear: this isn’t just about one person, but about defending the independence of the Fed, the foundation of credible and effective monetary policy.”

The U.S. Federal Reserve received a subpoena from the U.S. Department of Justice, threatening criminal charges, an action Powell has indicated is linked to his June testimony before Congress regarding the Fed's headquarters renovation project. Powell stated that this move “should be viewed in the broader context of the ongoing threats and pressure from the administration.”

“The threat of criminal charges stems from the fact that the Federal Reserve sets interest rates based on our own assessment of what is best for the public, rather than responding to the President’s demands,” Powell said on Sunday in both a written and video statement.

Global central banks sign statement supporting the Fed/Powell

List of central bank governors who signed the statement supporting the Fed and Powell:

• Christine Lagarde, President of the European Central Bank (ECB)
• Andrew Bailey, Governor of the Bank of England
• Erik Thedéen, Governor of Sveriges Riksbank (Swedish Central Bank)
• Christian Ketel Thomsen, Governor by Royal Appointment, The Central Bank of Denmark (Denmark)
• Martin Schlegel, Chairman of the Swiss National Bank (Swiss National Bank)
• Michele Bullock, Governor of the Reserve Bank of Australia
• Tiff Macklem, Governor of the Bank of Canada
• Rhee Chang-yong, Governor of the Bank of Korea
• Gabriel Galípolo, Governor of Banco Central do Brasil (Central Bank of Brazil)
• Ida Wolden Bache, Governor of Norges Bank (Norway)
• Anna Breman, Governor of the Reserve Bank of New Zealand
• François Villeroy de Galhau, Chairman of the Board of the Bank for International Settlements (BIS)
• Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS)

“What’s happening is a threat not just to Powell, but also to his successor and all members of the monetary policy committee,” said José Manuel González-Paramo, Professor of Economics at IESE Business School and former ECB official. “It suggests that officials who are seen to oppose the President’s demands risk being targeted, disrespected, and dragged into investigations by various agencies.”

He also argued that this presents a risk to financial stability, considering the international role of the U.S. dollar.

Meanwhile, certain central banks have stood out for not signing the joint statement. Among G7 countries, the Governor of the Bank of Japan, Kazuo Ueda, also did not sign. The Bank of Japan’s press office told Bloomberg that it “would refrain from commenting on the positions of other central banks.”

Gilles Moec, Chief Economist at AXA Investment Managers, stated, “The Bank of Japan has always had an ambiguous stance on central bank independence. While technically independent, there is a consensus within the institution that the government has a view on monetary policy and that the Bank of Japan should listen to it.”

Global recognition of Powell

Even before Tuesday’s statement, the role of the Federal Reserve and the U.S. dollar as pillars of the global financial system had led to comments from various parties.

On Monday, Tiff Macklem, Governor of the Bank of Canada, expressed full support for Powell, saying he “reflects the best of public service.”

“Chairman Powell is doing an excellent job under very difficult circumstances, guiding the Fed to make monetary policy decisions based on evidence, not politics,” Macklem said in an email.

Other central bank governors, including Lagarde, have continued to highlight the importance of central bank independence, defending and praising Powell repeatedly.

Joachim Nagel, President of Bundesbank in Germany, stated this week that the independence of central banks is “a fundamental condition for price stability and a precious asset.”

“In this context, the latest developments in the U.S. regarding the position of Fed Chair are concerning,” he added.

Later on Tuesday, when asked about Powell, the Governor of the Reserve Bank of India, who did not join the joint statement, stressed that maintaining central bank independence is crucial.

“Of course, independence is extremely important,” said Governor Sanjay Malhotra in an interview with NDTV. He added that it is necessary to separate monetary policy from the government.

“This is something we all need to protect globally,” he said. “And I hope this will improve more and more in the coming years.”

Trump has repeatedly called for aggressive interest rate cuts, arguing that the Fed should take action to make housing more affordable and reduce government borrowing costs. In an interview with NBC News on Sunday, the U.S. President denied any involvement in the Justice Department’s investigation of the Federal Reserve.

White House Press Secretary Caroline Levitt told reporters on Monday that the President did not direct the investigation and defended his right to criticize the central bank.