Germany's Klingbeil, on Powell probe, says central bank independence is 'clear line'

• Trump administration has threatened to indict Fed Chair Powell over congressional testimony comments, which Powell called a 'pretext' to influence interest rate policy
• Klingbeil stated Germany 'attaches great importance to the independence of central banks' and described himself as 'very transatlantic' despite increasing U.S.-Europe differences
• The German minister is in Washington for a G7 finance ministers meeting that includes participation from Australia, Mexico, South Korea, and India

Summary

German Finance Minister Lars Klingbeil strongly reaffirmed his commitment to central bank independence on January 12, responding to escalating U.S. political pressure on the Federal Reserve. Speaking in Washington, Klingbeil stated that central bank independence is a "clear line" for Germany, emphasizing the country's firm stance on the issue.

Key Development: The Trump administration has intensified its pressure campaign against Federal Reserve Chair Jerome Powell, threatening indictment over congressional testimony related to interest rate policy. Powell has characterized this as a "pretext" to influence rate decisions, which Trump wants cut dramatically.

Geopolitical Context: Klingbeil, who describes himself as "very transatlantic," acknowledged growing difficulties in U.S.-Europe relations. He noted that while Germany seeks continued dialogue with American partners, "discussions are becoming more difficult and differences are getting larger." The minister stressed the importance of maintaining cooperation between Europe and the U.S., warning that global division between the two would be detrimental.

Meeting Purpose: Klingbeil's Washington visit coincides with a finance ministers' meeting involving advanced economies including Australia, Mexico, South Korea, and India.

Market Implications: The threat to Fed independence raises concerns about potential politicization of monetary policy, which could affect investor confidence in U.S. interest rate decisions and dollar stability. Germany's public stance signals potential European resistance to any undermining of central bank autonomy, a cornerstone principle of modern monetary policy frameworks globally.