Andrew Bailey slams Trump’s ‘dangerous’ threats against US Federal Reserve
Bank of England Governor Andrew Bailey has said he is “very concerned” about President Trump’s threats against the US Federal Reserve.
In a hearing before the Treasury Select Committee, Bailey said the threat to the Fed’s independence was a “very serious situation”.
The Governor said he was worried about attempts to “trade off” monetary and financial stability maintained by independent central banks.
“I’m afraid I just think that is a very dangerous road to go down,” Bailey said.
“The job of an independent central bank is to provide those foundations, to take independent decisions to do it.”
“That’s how it works, that’s how it should work. The threats that I take very seriously.”
His defence of the Federal Reserve echo those of the European Central Bank president Christine Lagarde, who said Trump’s attacks on the Fed posed a “very serious danger” to the global economy.
“If that policy wasn’t independent any more, if it was dependent on political diktats from one person or another, then the balance of the US economy – and consequently the impacts that has on the world as a whole, because it is the world’s largest economy – would be very worrying,” Lagarde said.
Federal Reserve in precarious position
Comments by senior economists and monetary policymakers come as Trump moved to sack Federal Reserve governor Lisa Cook, who he has accused of mortgage fraud.
Fed chair Jerome Powell’s position has also come under threat after months of criticism by Trump, with the central bank opting to hold interest rates at recent meetings against the US president’s wishes.
Interest rates are set between 4.25 per cent and 4.5 per cent in the US. The Fed has left rates on hold since last year over fears that inflation could worsen in the world’s largest economy.
A cut is widely expected to come at its next decision but the president has already said that cuts were “too late”.
Bailey defends his pal Powell
Bailey has previously launched a defence of Powell, who he described as a close friend with “utmost integrity”.
Monetary Policy Committee (MPC) members were appearing before the Treasury Select Committee on Wednesday to explain their votes on interest rates at a historic decision last month.
The Bank’s next decision is set to come later this month.