What's happened
On January 13, 2026, eleven global central bank leaders issued a rare joint statement expressing full solidarity with US Federal Reserve Chair Jerome Powell amid a criminal investigation into his handling of a $2.5 billion Fed renovation. The statement, signed by leaders including ECB's Lagarde and BoE's Bailey, emphasized the critical importance of central bank independence against political pressure from the Trump administration.
What's behind the headline?
Central Bank Independence Under Siege
The joint statement by eleven global central bank chiefs is a decisive and rare public defense of Jerome Powell, underscoring the unprecedented nature of the legal threats he faces. Central bank independence is foundational to maintaining price stability and economic confidence; politicizing monetary policy risks destabilizing markets and inflation expectations.
Political Pressure and Institutional Integrity
The Trump administration's aggressive push for rate cuts and the subsequent DOJ investigation into Powell's testimony and renovation spending reveal a broader struggle over control of US monetary policy. This conflict threatens to erode the Fed's credibility and could set a dangerous precedent where political actors leverage legal mechanisms to influence central bank decisions.
Global Implications
Given the US dollar's central role in global finance, any perceived weakening of the Fed's autonomy reverberates worldwide. The solidarity shown by central banks from Europe, Australia, Canada, and Asia signals concern about the spillover effects of US political interference on global economic stability.
Forecast and Consequences
Powell's term ends in May 2026, and the legal cloud complicates the nomination and confirmation of his successor. Congressional skepticism, especially from Republican lawmakers, may delay or block appointments, prolonging uncertainty. Markets will likely remain volatile amid fears of politicized monetary policy, potentially leading to higher borrowing costs and inflationary pressures.
Impact on Readers
While the average reader may not directly influence Fed decisions, the outcomes affect mortgage rates, inflation, and economic growth. A politicized Fed risks undermining economic stability, which will impact household finances and investment climates globally.
What the papers say
The Guardian's Heather Stewart highlights the unprecedented nature of the joint statement, noting it was coordinated by the Bank for International Settlements and signed by major central bank leaders including Andrew Bailey and Christine Lagarde. Stewart quotes Powell's video statement describing the DOJ probe as "unprecedented action" and a political pretext, with Trump distancing himself from the investigation.
SBS News emphasizes the bipartisan backlash within the US, quoting Fed officials like St Louis Fed President Alberto Musalem affirming commitment to independent monetary policy regardless of leadership changes. It also details Trump's ongoing criticism of Powell and the Fed's rate decisions.
Reuters reports on the Reserve Bank of New Zealand Governor Anna Breman's participation in the statement and contrasts it with Japan's government stance, where the Bank of Japan refrained from joining, citing coordination with government economic policy.
The Independent and Business Insider UK provide detailed lists of signatories and underscore the statement's focus on preserving central bank independence as a cornerstone of economic stability. They also note the legal probe's focus on renovation costs and Powell's congressional testimony.
Sky News and The Mirror focus on Andrew Bailey's role and the broader implications for Fed leadership, highlighting the political tensions and the potential impact on Powell's successor nomination.
Together, these sources paint a picture of a rare, coordinated global defense of central bank independence amid a politically charged legal challenge to the US Fed Chair, with significant implications for monetary policy and economic stability worldwide.
How we got here
Jerome Powell, appointed Fed Chair in 2018, has faced sustained pressure from President Trump to cut interest rates faster. The current probe concerns allegations of misuse of taxpayer funds related to costly renovations at the Fed's Washington headquarters and whether Powell misled Congress. This legal threat marks an unprecedented challenge to Fed independence, prompting global central banks to publicly defend Powell.
Go deeper
- What is the DOJ investigation into Jerome Powell about?
- Why are global central banks supporting Powell?
- How could this affect US interest rates and the economy?
More on these topics
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Jerome Hayden "Jay" Powell is the 16th Chair of the Federal Reserve, serving in that office since February 2018. He was nominated to the Fed Chair position by President Donald Trump, and confirmed by the United States Senate.
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Andrew Bailey may refer to:
Andrew Bailey (banker) (born 1959), British banker, Governor of the Bank of England
Andrew Bailey (baseball) (born 1984), American baseball pitcher and coach
Andrew Bailey (performance artist) (born 1947), British performance.
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Christine Madeleine Odette Lagarde (French: [kʁistin madlɛn ɔdɛt laɡaʁd]; née Lallouette, IPA: [lalwɛt]; born 1 January 1956) is a French politician and lawyer who has been the president of the European Central Bank since 2019. She previously serv
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Donald John Trump is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021.
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The European Central Bank is the central bank for the euro and administers monetary policy within the Eurozone, which comprises 19 member states of the European Union and is one of the largest monetary areas in the world.
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The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based.