From Morningstar: 2025-04-24 05:11:00

Global financial markets and governments are closely monitoring the Federal Reserve, particularly after President Trump criticized Chair Jerome Powell. US stock prices fell due to concerns about the impact of political instability on the institution. Despite Trump’s retraction, he still wants interest rate cuts. This has raised concerns about the Fed’s independence.

Former UK Prime Minister Liz Truss highlighted how the Bank of England destabilized markets with a gilt selloff, leading to her government’s downfall. Jeremy Hunt reaffirmed support for central bank independence after replacing Truss. With a new Labour government in power, a repeat scenario seems unlikely, although lower interest rates could boost the economy.

In 1992, the UK government’s failed attempt to maintain pound sterling in the ERM led to Chancellor Norman Lamont’s resignation. This event, known as “Black Wednesday,” marked a shift towards central bank independence. Market power over governments was solidified, emphasizing the importance of central bank autonomy.

Trump’s comments on the Federal Reserve have raised concerns about the institution’s independence and market stability. The recent 90-day tariff pause was seen as a response to bond market instability. Analysts hope Trump will continue to make reasoned decisions to prevent economic volatility.

Singer Capital Markets suggests the Bank of England could benefit from a Fed-style employment mandate to strengthen its independence. Currently focused on inflation targeting, the Bank faces challenges with energy price-driven inflation. A broader mandate could provide the Bank with more flexibility in its decision-making process. Former Bank of England official, Tony Yates, defended Andrew Bailey against attacks from Liz Truss, calling her an “idiot” for criticizing him. Powell remains steadfast amid political pressure. Antje Schiffler contributed to the story. No securities mentioned in the article are owned by the authors.



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