Central Bankers in Europe Fear More Turbulence in US Ties

Europe’s central bankers are leaving an annual getaway with their US counterparts far from reassured that long-standing norms in global cooperation remain intact and worried that more turmoil is ahead for an already testy relationship with Washington, sources familiar with the discussion said. Federal Reserve policymakers went out of their way to ease their counterparts’ concerns this week, promising to honor all of their commitments.

But, given the separation between the central bank and the administration, they could offer no guarantees against sudden policy shifts by President Donald Trump, more than half a dozen officials on the sidelines of the Kansas City Fed’s annual Jackson Hole Economic Symposium said. Recent US Treasury interventions to prop up the Japanese yen and to lower longer-term US borrowing costs were particularly concerning as they foreshadowed more intervention and breaks with norms, the officials, who asked not to be named, said. 

After the August 1 yen transaction, US Treasury Secretary Scott Bessent confirmed that the Treasury had sold euros for the Japanese currency and said he reassured central banks in the region that the move was “just a reallocation of resources.” On Friday, he said that the foreign exchange assets to buy yen came from the Treasury’s Exchange Stabilization Fund.

But European officials were especially annoyed the US did not give them a customary heads-up that euro sales were part of the transaction, the sources said. “That was infuriating,” one of them said. “You always pick up the phone and give heads-up.” “The message to me is that the US does whatever it wants.” Others were more forgiving and said the transaction was so unusual that it may have been an honest oversight. Spokespeople for the European Central Bank and the Federal Reserve declined to comment.

A US official said the US-Japan intervention was undertaken to counter disorderly movements in the yen and to support stability in global financial markets. “It was not directed at anyone else,” the official said. “Treasury maintains close and ongoing communication with our international counterparts, but we do not comment on the operational details of those discussions.”