Europe’s central bankers fear more turbulence in testy U.S. relations

European central bankers expressed growing anxiety and concern about the state of their relationship with the United States during the annual Jackson Hole Economic Symposium. While Federal Reserve policymakers assured their European counterparts that they would honor all commitments, the officials on the sidelines remained wary given the apparent separation between the central bank and the White House.

Recent U.S. Treasury interventions to support the Japanese yen and reduce longer-term borrowing costs raised red flags among the Europeans, who feared more such actions and potential policy shifts by President Donald Trump. European officials were particularly annoyed by the U.S. not providing a heads-up when the Treasury sold euros for yen, viewing it as a breach of norms.

While some officials were more forgiving, suggesting the transaction might be an oversight, others remained firm that the U.S. was not abiding by established norms. European central bankers are concerned that the administration's willingness to take unusual measures, such as bond buybacks, could lead to market upheaval beyond the U.S. borders.

They also voiced worries that political meddling could eventually target the dollar liquidity backstops provided by the Fed to the world's biggest central banks, which are crucial for global financial stability. Despite these concerns, the Federal Reserve has not shown any signs of altering the swap lines authorized by the Federal Open Market Committee itself, and Treasury officials maintain close communication with international counterparts.