Fed under fire

Undermining the institution can have serious consequences

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Itis not usual for heads of large central banks to make unscheduled appearances or statements.

If they do, even at short notice, it’s a clear sign that things are not normal. United States (US) Federal Reserve Chairman Jerome Powell’s statement on Tuesday is worrying for financial markets and policy managers across the world. Mr Powell said that an investigation was being conducted into his June testimony before the Senate Banking Committee. The statement was related, in part, to the renovation of the Federal Reserve office buildings. This is being seen as yet another direct attack on the US central bank. “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” noted Mr Powell in this statement. These are strong words for someone like him, but underscore the seriousness of the underlying issue.