Global central bankers defend Fed's Powell after Trump threat

• The criminal probe formally concerns Fed headquarters renovations but is seen as a 'pretext' to exert presidential control over interest rate policy
• Central bankers warn that political interference with the Fed would erode trust in its inflation commitment, leading to higher inflation and global financial market volatility
• The U.S. as the world's dominant economy would likely export higher inflation via financial markets, making it harder for other central banks to maintain price stability

Summary

Global central bank officials are preparing a coordinated statement defending U.S. Federal Reserve Chair Jerome Powell following threats from the Trump administration of a criminal indictment. The statement, expected to be released Tuesday, January 13, will emphasize the critical importance of central bank independence and has been extensively revised over the past day.

Key Details:

• The Trump administration has initiated a criminal probe ostensibly concerning Fed headquarters renovations, but sources characterize this as a "pretext" to gain presidential influence over interest rate decisions
• Multiple international central bankers are expected to sign the statement, with provisions for additional signatures later
• The move has drawn criticism from both the financial community and key Republican Party members

Market Implications:

Central bankers warn that political interference with the Fed could have severe consequences:

• Erosion of trust in the Fed's commitment to its inflation target
• Higher inflation in the U.S.
• Increased global financial market volatility
• Given U.S. economic dominance, elevated inflation would likely spread internationally through financial markets, complicating other central banks' efforts to maintain price stability

Context:

The controversy comes after Powell's December 10, 2025 FOMC press conference. The unprecedented nature of global central bankers rallying to defend Fed independence underscores the gravity of the situation and the potential systemic risks posed by political interference in monetary policy.