Can the Fed withstand the pressure?
Economists have been keeping a close eye on the meeting of international central bankers at Jackson Hole in the US state of Wyoming. It was the last of the annual gatherings chaired by US Federal Reserve Chairman Jerome Powell, whose term ends in 2026 and who has been under pressure from US President Trump for months to cut interest rates. Powell did not rule out a cut, but made it clear that his decision would be informed by economic criteria. Europe's press takes stock.
Courageous defence of autonomy
Corriere del Ticino emphasises the steadfastness of the Fed's boss:
“Jackson Hole was above all a test for Jerome Powell, who has been under fire for months from President Trump, who never misses an opportunity to loudly demand an immediate and massive interest rate cut. ... Powell opted for caution, but in times of political pressure caution is an act of courage. ... So this year Jackson Hole offered us the spectacle of a central banker resisting. We don't know whether the interest rate will really be cut on 17 September, but one thing is clear: Powell has defended the Fed's independence. And in a polarised America, that in itself is a political act.”
Trump will bend the Fed to this will
When Powell's term ends in May 2026 a new wind will blow through the Fed, the Financial Times fears:
“The Fed is supported by structures that protect its independence, but anyone who doubts Trump's desire and willingness to bend it towards his will is kidding themself. ... Already, Trump has nominated for a temporary role at the Fed an adviser, Stephen Miran, who has written about the benefits of giving the president the ability to fire central bank officials at will, supposedly in the name of democratisation of the institution. This time next year, the institution of the Fed will almost certainly look rather different, most likely with a much more Trump-friendly chair at the helm.”
Threat of loss of confidence
Trump's repeated efforts to bring the Fed under his control are highly risky, writes El País:
“After months of unprecedented political pressure, Powell emphasised yesterday that the Fed's decisions are based on data. ... But Trump is resorting to unusual means to exercise pressure. ... The message is clear: anyone who defies the White House's instructions knows what they're risking. ... Despite Trump's clumsy efforts to exercise more control over the US Federal Reserve, the reaction of the markets - so far the only entities capable of persuading the president to rethink - has been very limited. But the risk of a loss of confidence in the Fed, and by extension in US assets, grows with every assault.”
The entire dollar system is at stake
Handelsblatt is full of praise:
“Powell has once again chosen the best possible option to fend off the president's continuous attacks: he simply ignores them. That's what you call composure. ... He doesn't want to be suspected of either acting as the president's willing henchman or of avoiding necessary interest rate cuts just to send a signal of independence. The Fed is simply doing its job. ... Powell knows what's at stake: if the Federal Reserve loses its independence, the consequences for the financial markets would be disastrous. The effects of the global trade war instigated by Trump would be nothing in comparison. Confidence in the entire dollar system would be called into question.”