At Sintra getaway, central bankers mull threats to their domain

At their annual gathering in the hills of Portugal's Sintra, central bankers last week confronted rising challenges to their control of the global money system, from political attacks on the US Federal Reserve to the rise of stablecoins.

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Recent editions of the European Central Bank’s (ECB) getaway event have been dominated by worries about high inflation — no surprise after central banks whose core task is price stability were mostly late to react to a surge in prices in 2021-2022.

But this year’s discussions — from choreographed panel debates among central bank chiefs to late-night exchanges at the hotel bar — were centered on more existential threats to the monetary system as we know it.

US President Donald J. Trump’s frequent, often personal, attacks on Federal Reserve Chair Jerome H. Powell — and hints about his replacement — were the most obvious example.

Any suggestion that the Fed might bow to pressure from the White House to lower borrowing costs would hurt its reputation for independence — for decades a core tenet of central banking seen crucial for keeping policy credible and investors onside.

Two in three reserve managers at central banks polled by UBS Asset Management said in a survey released last week they feared that Federal Reserve independence was at risk.

Mr. Powell batted away such worries during a panel discussion, saying he and colleagues were focused “100%” on low inflation and full employment “in a completely nonpolitical way.”