Almost the entire 'banking world' supported Jerome Powell in the clash with Trump. The Bank of Japan was the only one to break ranks — and that says more than it seems.
Is the independence of central banks under threat?
After information about the investigation regarding Powell's testimony on the costs of renovating Fed buildings, part of the market interpreted this as political pressure on the central bank. Powell suggests that it is about pressure for rate cuts.
In response, the heads of many central banks signed a joint statement supporting Powell — including the ECB, the Bank of England, the Bank of Canada, and several other institutions. The Bank of Japan did not join. According to sources, the reason is related to relations with the USA and reluctance to engage in a dispute that Trump could use against Tokyo.
It raises the question of the real independence of central banks. If political pressure begins to shape interest rates and liquidity, risky markets may gain in the short term — but in the long term, the cost in terms of the credibility of the system rises.