LONDON
Bank of England Governor Andrew Bailey said Tuesday that any threat to the independence of the US Federal Reserve could have significant implications for the UK, highlighting concerns about the stability of the world’s reserve currency.
Bailey expressed concern Tuesday to the Treasury Committee about the independence of the US Federal Reserve, following a criminal investigation into Chair Jay Powell for alleged misuse of taxpayer funds linked to renovations at the Fed’s Washington headquarters.
He noted potential spillovers for Britain from any threat to the Fed's independence.
On his support for Powell, Bailey told MPs, "While it was not my place to 'intervene' in domestic US issues, there were particular concerns for how this was affecting the US dollar as the world’s reserve currency. So, it is pretty unprecedented for other central bank governors to do this [send a letter], but I think it’s, you know, it’s a point that we have to make in this situation."
"But … we have to be careful what we do. I will say also, because Jay Powell is a close colleague and a friend of mine, I’ve said before in public and I’ll say it again, he is, in my view, a man of the utmost integrity," he added.
He also said that geopolitical uncertainty and global trade tensions remain key considerations for the central bank as it monitors financial risks.
"I do think that geopolitical tensions and trade, particularly trade issues, are an important part of that (rise in risks to financial stability last year)," he said.
Asked about US President Donald Trump’s pursuit of Greenland and trade tensions, Bailey said he did not want to suggest that specific issues could trigger upheaval in the financial system.
"But the level of geopolitical uncertainty and the level of geopolitical issues is obviously a big consideration because they can have financial stability consequences," he added.
