Bank of England Governor Andrew Bailey has issued a stark warning about the threat to the independence of the U.S. Federal Reserve, describing the issue as "very serious." He stressed that the Fed's reputation has been built on its independence and ability to make decisions without political interference.
Bailey made the remarks while testifying before the UK parliament's Treasury Committee. The issue comes after President Donald Trump stepped up his pressure on the Fed, including efforts to fire Chairman Jerome Powell and Governor Lisa Cook.
"I think monetary stability and financial stability ... are fundamental to policy," Bailey said.
Trump's actions are seen as challenging the fundamental principles of the financial system, as the Fed faces a crucial legal test to ensure it continues to function without political influence. Bailey stressed that trading the independence of central banks for the political interests of governments is a dangerous path.
According to Bailey, monetary and financial stability are fundamental to economic policy. By maintaining the independence of institutions like the Fed, governments and parliament can make other policy decisions more confidently and effectively.
