The RBA has reaffirmed central bank independence as US legal pressure on Federal Reserve chair Jerome Powell intensifies.
The Reserve Bank of Australia (RBA) has publicly backed the independence of central banks, standing in solidarity with the US Federal Reserve as its chair Jerome Powell faces a criminal investigation in Washington.
In a joint statement attributed to the RBA and governor Michele Bullock, global central bank leaders said they stood “in full solidarity with the Federal Reserve System and its chair Jerome H. Powell”, stressing that independence was fundamental to price, financial and economic stability.
“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,” the statement said, adding it was “critical to preserve that independence, with full respect for the rule of law and democratic accountability”.
The statement said Powell had “served with integrity, focused on his mandate and an unwavering commitment to the public interest”, describing him as “a respected colleague who is held in the highest regard by all who have worked with him”.
Bullock was listed among a group of senior global policymakers endorsing the statement, alongside Christine Lagarde of the European Central Bank, Andrew Bailey of the Bank of England, Erik Thedéen of Sveriges Riksbank, Christian Kettel Thomsen of Danmarks Nationalbank, Martin Schlegel of the Swiss National Bank, Ida Wolden Bache of Norges Bank, Tiff Macklem of the Bank of Canada, Chang Yong Rhee of the Bank of Korea, Gabriel Galípolo of Brazil’s central bank, and senior figures from the Bank for International Settlements.
The show of support followed confirmation that the US attorney’s office in the District of Columbia has launched a criminal investigation into Powell.
“On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June,” Powell said in a statement.
The testimony related partly to the renovation of the Federal Reserve’s historic Washington headquarters and whether Powell misled Congress about the project’s scope.
While acknowledging the rule of law, Powell said the “unprecedented action” should be viewed in the broader context of sustained political pressure on the Fed.
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” he said. “It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project.”
Powell said the legal threat was directly tied to the Fed’s monetary policy decisions, which have long drawn criticism from US President Donald Trump.
“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,” Powell said.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
Tensions between Trump and Powell date back to Powell’s first year as chair in 2018. Powell was re-nominated to the role by the Biden administration in November 2021.
Commenting on the situation, Betashares chief economist David Bassanese said the investigation appeared to be a “last ditch effort” to pressure Powell to end his term as chair in May and step down from the Federal Open Market Committee, which runs until January 2028.
“Trump is playing with fire in his repeated attempts to pressure the Fed into cutting rates,” Bassanese said, warning the move risked undermining confidence in Fed independence and pushing long-term bond yields higher.
Meanwhile, Trump told NBC News he was unaware of the Justice Department’s actions, though he again criticised Powell’s performance at the Fed and the cost of its headquarters renovation.
