From Yahoo Finance: 2025-03-22 05:14:00

European central banking officials are questioning the reliability of the U.S. Federal Reserve for dollar funding during market stress due to Trump administration policies. Despite doubts, the Fed has not signaled any changes. European officials are considering alternatives, but there is no good substitute for the Fed, which is crucial for global financial stability.

Discussions about funding alternatives are part of the ECB’s risk assessment of the euro zone’s financial system. The U.S. dollar is dominant in trade and capital flows. The Fed’s support in 2023 helped avert a financial system collapse, showing its importance. While doubts exist, European officials see Fed’s funding as crucial and a potential cut could have severe global consequences.

European officials fear Trump administration pressure on the Fed over time may lead to a scenario where dollar funding is cut. This could harm European banks heavily reliant on short-term dollar borrowings. Fed’s independence is key, but potential political pressure remains a concern. Euro-zone banks rely heavily on dollar funding, making continued access crucial for financial stability.



Read more at Yahoo Finance: Exclusive-Some European officials weigh if they can rely on Fed for dollars under Trump