European Central Bankers Fear US Interventions Could Spark Global Financial Volatility
European central bankers have expressed concerns that recent US interventions in currency and government debt markets may disrupt global financial stability.
The officials, speaking on condition of anonymity at the Federal Reserve Bank of Kansas City's annual Jackson Hole Economic Policy Symposium, worry that established norms of international cooperation could be undermined.
The Treasury Department's involvement in an operation with Japan to support the yen has caused particular tension among European officials. They had not received advance notice of the intervention, which was characterized by US Treasury Secretary Scott Bessent as a reallocation of resources from euros to yen.
Bessent argued that severe currency movements could force investors to unwind positions, destabilize international markets, and increase borrowing costs for US households and businesses. However, European officials are watching the Treasury's plans to expand buybacks of longer-dated US government securities with concern, fearing they may be seen as an attempt to restrain longer-term borrowing costs through unconventional market intervention.
The Federal Reserve has sought to reassure its European counterparts that it will honor its commitments and operate independently from the Trump administration. However, European officials remain uncertain about the Fed's ability to maintain this independence in light of the Treasury's recent actions.