European Central Bank officials are growing more concerned about repeated U.S. government intervention in currency and Treasury markets, according to BlockBeats. People familiar with the matter said that during last week’s Jackson Hole gathering, Federal Reserve officials tried to reassure their European counterparts and said existing international cooperation arrangements would continue. Even so, Fed officials could not guarantee that the Trump administration would not abruptly shift policy, given the institutional separation between the Fed and the U.S. government.
European officials are said to be watching the U.S. Treasury particularly closely. On Aug. 1, the Treasury intervened in foreign exchange markets by selling euros and buying yen, and European officials were unhappy that Washington did not give advance notice in line with customary practice. Concerns have also widened after Treasury Secretary Bessent expanded buybacks of long-dated U.S. Treasuries, a move that European officials see as further blurring the line between fiscal, exchange-rate and monetary policy. They warned that if Washington keeps using financial tools for economic and trade objectives, markets may begin to question both the Fed’s policy independence and the stability of dollar swap arrangements. For now, there is no sign that those swap lines are changing.
European Central Bank officials have become increasingly concerned about repeated intervention by the U.S. government in foreign exchange and Treasury markets, according to BlockBeats on Aug. 31.
People familiar with the matter said that during last week’s Jackson Hole annual meeting, Federal Reserve officials proactively tried to reassure their European counterparts and pledged to keep existing international cooperation arrangements in place. Still, because the Fed is institutionally independent from the U.S. government, Fed officials could not guarantee that the Trump administration would not suddenly change course.
European officials are paying particular attention to recent U.S. Treasury operations in financial markets. On Aug. 1, the Treasury intervened in foreign exchange markets by selling euros and buying yen. European officials were dissatisfied that the U.S. side did not notify them in advance, which they said broke with normal practice.
Treasury Secretary Bessent’s recent expansion of long-dated U.S. Treasury buybacks has added to those concerns. European officials see that step as making the boundary between fiscal policy, exchange-rate policy and monetary policy less clear.
They also warned that if the U.S. government continues using financial tools to pursue economic and trade goals, markets may start to question the Federal Reserve’s policy independence and the stability of dollar swap mechanisms. They are also concerned that Washington could later press the Fed to intervene directly in the Treasury market.
At present, there is no sign that dollar swap arrangements are set to change.
Kevin Warsh, the new Federal Reserve chair, has recently stepped up communication with European policymakers, and European officials have given him a relatively positive assessment for his handling of international financial cooperation.
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