International Support for the US Federal Reserve Amid Political Pressure
Central bank governors from around the world issued a joint statement supporting US Federal Reserve Chairman Jerome Powell as he faces a criminal investigation and mounting pressure from US President Donald Trump to resign early. This strong support from top central bankers—from Australia, Brazil, Canada, Europe, New Zealand, South Africa, South Korea, the UK, and others—stems from the impact of US interest rate decisions on the global economy.
Central bank independence is the global norm that has helped prevent a repeat of the high and persistent inflation of the 1970s. Reorienting monetary policy to a politician, especially one as unpredictable as Trump, is undesirable. Trump has repeatedly attacked the Federal Reserve and expressed his desire to fire Powell. However, the law stipulates that the president can only remove the Fed chairman for "good cause."
The US central bank is currently facing a criminal investigation related to Powell's testimony before the Senate Banking Committee regarding the $2.5 billion renovation of the Fed's historic office buildings. Powell denied any involvement and stressed that the real issue was preserving the central bank's independence.
More than a dozen of the world's top central bank governors issued a statement of support, saying: "We stand in full solidarity with the Federal Reserve System and its chairman, Jerome Powell. Central bank independence is the cornerstone of price stability and sound financial and economic conditions." Further support came from leading American economists, including all living former Federal Reserve chairmen, such as Alan Greenspan.
Trump wants to cut interest rates significantly, from the current target range of 3.5% to 3.75% to 1%. But most economists believe this would lead to a sharp rise in inflation. The current inflation rate in the United States is 2.8%, higher than the Federal Reserve's 2% target.
This is not the first time a U.S. president has pressured the central bank. In 1972, President Richard Nixon pressured the Fed to cut interest rates before the presidential election, contributing to the high inflation of the mid-1970s. A similar thing happened in Türkiye in the early 2030s, when President Recep Tayyip Erdogan pressured the central bank to lower interest rates, resulting in extremely high inflation.
