European Central Bankers Fear Turbulence in US Relations

European central bankers are concerned that tensions between the US and other countries could lead to more turbulence in global financial markets. At the recent Jackson Hole Economic Symposium, Fed policymakers went out of their way to ease concerns from counterparts, promising to honor all commitments.

However, given the separation between the Federal Reserve and the administration, they could not offer guarantees against sudden policy shifts by President Donald Trump.

The European officials were particularly upset that the US did not give them a customary heads-up about selling euros for Japanese yen. They saw this as a sign that the US is willing to break with norms in global cooperation.

Another concern was the plan to increase buybacks of longer-dated bonds, which may need to be financed by issuing more shorter-term maturities. This indicates a willingness to take unusual measures to cap borrowing costs.