European Central Bankers Warn of U.S. Policy Turbulence
European central bankers left the Jackson Hole Economic Symposium in Wyoming uneasy about recent United States policy moves, fearing they could strain long‑standing norms of global financial cooperation. More than half a dozen officials, speaking on condition of anonymity, described the atmosphere as one of anxiety.
The United States Treasury’s intervention on 1 August to support the Japanese yen involved selling euros to purchase yen. Treasury Secretary Scott Bessent later confirmed the euro sales, but European officials expressed frustration that the customary advance notice was not provided.
In parallel, the Treasury announced plans to increase buybacks of longer‑dated Treasury securities, a program that may be financed through a larger issuance of short‑term debt. European policymakers worried that this approach signals a willingness by Washington to intervene more actively to lower borrowing costs, and one source even questioned whether pressure could eventually be placed on the Federal Reserve to purchase bonds. The Treasury rejected that interpretation, stating that the long‑end buybacks are intended to improve market liquidity and bring long‑term yields down after they rose above what the department deemed “fair value.”
Discussions also covered the Federal Reserve’s dollar‑swap lines with major central banks, which provide dollar liquidity during periods of financial stress. Some officials voiced concern that escalating political tensions could eventually jeopardise these facilities, although there was no indication of an immediate threat and officials expect the swap lines to remain intact. The Treasury reiterated that decisions regarding the swap facilities rest solely with the Fed.
Fed Chair Kevin Warsh has been actively seeking to strengthen ties with overseas policymakers since taking office, including a recent trip to Europe that left a broadly positive impression among his counterparts. Nonetheless, European officials cautioned that political meddling could undermine the stability of the swap arrangements and broader transatlantic financial cooperation.