The American president Donald Trump watches Jerome Powell, his nominee for head of the U.S. Federal Reserve, step onto the podium at the White House in Washington, United States, on Nov. 2, 2017. (Credit: Carlos Barria/AFP.)
The Bank for International Settlements (BIS) reminded Sunday of the importance of central banks' independence, at a time when Donald Trump's stream of criticisms towards the president of the U.S. Federal Reserve (Fed) is causing concerns.
In its annual report published Sunday, the BIS — an institution regarded as the central bank of central banks — reviewed major challenges likely to affect monetary policies, including trade tensions with tariffs and high levels of public debt in various countries.
This institution based in Basel, Switzerland, also repeatedly brought up the issue of central banks' independence, noting that they must be able to act without "political interference" to carry out their mission, the report emphasized.
During a conference ahead of the report, its president, Agustin Carstens, declined to comment on the fierce criticisms from the U.S. president towards Jerome Powell, the president of the American central bank, but reiterated the importance of central banks' independence;
A central bank is "an institution that must be able to do what it deems necessary to preserve financial stability and the value of its national currency" to maintain "conditions for an economy to operate healthily," he insisted. This holds true even if "what needs to be done does not correspond to what a government would like to see," he argued.
In a message posted Tuesday on his social network Truth, the American president called Powell a "beast" and "stubborn." For several months, Donald Trump, who wants to see interest rates lowered, has accused him of pursuing overly restrictive monetary policies, while Powell defends the idea that the Fed can still wait, particularly to gauge the effects of tariffs on inflation and economic activity.
Thursday, new criticisms from Trump against Powell drove the dollar down. The American president mentioned a possible successor, which worried markets about the independence of the world's most powerful central bank.
According to the BIS, central banks face a complex economic situation, which forces them to make a delicate arbitration in deciding whether to continue lowering their interest rates or to put them on hold instead. In its annual report, the BIS highlighted that "this arbitration is particularly difficult" given the lack of clarity "regarding the effects of the tariffs implemented so far" and "uncertainty regarding potential future measures."
