Reserve Bank of Australia (RBA) governor Michele Bullock has joined a growing chorus of central bank chiefs declaring “full solidarity” with US Federal Reserve chair Jerome Powell, after US President Donald Trump escalated his attacks and the US Department of Justice (DOJ) threatened a criminal indictment, 9News reported.
Bullock was among more than a dozen foreign central bank heads who signed a joint statement backing Powell after the DOJ issued grand jury subpoenas over his testimony to a Senate Banking Committee hearing in June about the cost of renovating the Fed’s Washington headquarters.
The statement, posted on the RBA website, read: “The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve.
“It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.
“Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him.”
On Sunday, Powell described the administration’s actions as a bid to exert political control over interest rates, calling the threat of criminal charges “pretexts’’ in the president’s campaign to seize control of US interest rate policy.
Trump, who appointed Powell in 2018, has repeatedly berated the Fed chair since returning to the White House, demanding aggressive rate cuts to boost growth and slash federal borrowing costs. He has said he would “love to fire him” and on Tuesday reportedly declared: “The jerk will be gone soon.”
Economists have warned that if a politicised Fed “caved in” to Trump’s demands, it would damage its credibility and increase inflation and financial instability in the US – with spillovers for Australia, The Guardian reported.
Central banks are granted independence so they can make unpopular, inflation‑beating decisions on interest rates, such as hikes to cool an overheating economy. Unpredictable, politically driven rate cuts would risk de‑anchoring inflation expectations, increasing market volatility and weighing on share markets, first in the US and then globally.
Higher US inflation could also be imported into Australia via more expensive US‑sourced goods, such as machinery and technology, while a weaker US dollar and stronger Australian dollar would complicate conditions for exporters and policymakers.
Bullock’s decision to publicly back Powell marks an unusually direct intervention by the RBA governor in defence of central bank independence.
Commentators described the joint letter as “quite unprecedented for central bankers to be making a collective statement in this way” and warned that if the US government succeeded in exerting greater control over the Fed, it could become a benchmark other governments might seek to emulate, The Guardian reported.
Australia’s central bank has also faced scrutiny over cost overruns on its own head office renovation in Sydney, but unlike the Fed it has not been subjected to criminal threats or direct political attempts to dictate interest rate moves.
Bullock has previously praised Powell for keeping his focus on the economy rather than being drawn into political fights, saying in July that “the Fed is doing what it’s supposed to be doing, which is focusing on the economy … not getting drawn into the debate.”
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