European Central Bankers fear U.S. policy shifts could rattle global markets

European central bankers expressed worry at the Jackson Hole symposium that recent U.S. policy actions might indicate forthcoming difficulties in transatlantic financial collaboration, according to Reuters' exclusive report on Sunday. Officials familiar with the dialogue claimed that Fed policymakers endeavored to allay their European counterparts' fears, but were unable to guarantee the actions of President Donald Trump's administration.

The U.S. Treasury's intervention on August 1 to support the Japanese yen emerged as a major source of concern, as Treasury Secretary Scott Bessent admitted that euros were sold to acquire yen, though European officials were annoyed at lacking prior warning. European officials have also been wary of recent U.S. government debt maneuvers, with Bessent planning to boost purchases of longer-dated Treasury securities, possibly financed via increased issuance of shorter-term debt.

This could be interpreted as Washington being more inclined to intervene actively to lower borrowing costs. One source questioned whether such actions might eventually compel the Fed to purchase bonds. The Treasury categorically dismissed this notion, asserting that the increased buybacks aimed at enhancing liquidity rather than setting a cap on interest rates.

Officials also deliberated over the Fed's dollar swap lines with major central banks, which serve as a source of dollar liquidity during financial turmoil. Concerns arose that political tensions might jeopardize these facilities, though there has been no evidence that the swap lines are presently under threat. Treasury officials emphasized that any decisions concerning the facilities would solely be made by the Fed.

Fed Chair Kevin Warsh has been striving to bolster relations with overseas policymakers since his appointment, including a recent trip to Europe that received generally positive feedback.