The federal Treasurer has thrown his support behind the RBA’s public defence of Federal Reserve chair Jerome Powell, after a criminal investigation was launched against the central banker.
Australia has joined a global show of support for US Federal Reserve chair Powell, with Treasurer Jim Chalmers backing RBA governor Michele Bullock’s move to sign a joint statement alongside international central bankers defending the independence of the US central bank.
US President Donald Trump has recently intensified his long-running feud with the Fed chair, which has escalated from public criticism to legal threats against the US central bank’s autonomy.
The conflict centres on the cost of the central bank’s US$2.5 billion renovation; however, Powell has publicly stated that the underlying discontent stems from his hesitance to slash interest rates in accordance with President Trump’s demands.
On 12 January, the stoush intensified when the Trump administration launched a Department of Justice (DOJ) probe, issuing grand jury subpoenas to the Fed over Powell’s congressional testimony about cost blowouts to the headquarters renovation project.
A statement released by the Federal Reserve chair alleged: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Speaking at a news conference in Brisbane on Friday (16 January), Australian Treasurer Chalmers offered a personal defence of Powell, with whom he has met several times over the years.
“He strikes me as a very professional, very diligent public servant in the United States,” he said.
“I know him a little bit, I respect him, and that’s been my experience with him.”
While he refused to weigh in on the legal proceedings taking place in the US, Chalmers made the broader point that governments must protect central banks from political attack.
“The specific issues at play here are a matter for the Americans, but the Australian position, the government’s position and the Governor’s position are very clear,” Chalmers said.
He said Australia was “a very big supporter of central bank independence.”
As such, he said he supported the move by the Reserve Bank of Australia governor Bullock to sign a statement of support for the Fed chair, along with several other international central bankers.
“Central bank independence is absolutely essential,” he said.
“The Governor of the Reserve Bank informed me that she would be putting her name to the statement in support of central bank independence. I told her at the time that I consider that to be appropriate.
“I think it’s unsurprising that central bank governors from around the world would support central bank independence, and I think it’s entirely appropriate that the Governor of the Reserve Bank of Australia would lend her name to that.”
Global central bankers unite behind Powell
In their joint release, published on 14 January, 14 central bankers asserted that the independence of monetary authorities was a foundation of economic stability.
“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,” the statement said.
Issued under the leadership of European Central Bank president Christine Lagarde, the declaration insisted: “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.”
Signatories include the heads of the Bank of England, Bank of Canada, Bank of Korea, and Banco Central do Brasil.
[Related: Trump wants US to buy $200bn in mortgage bonds]
