Europe’s central bankers fear more turbulence in testy US relations

European central bankers left their annual meeting with US counterparts in Jackson Hole, feeling increasingly uneasy about the future of their relationship with Washington. While Federal Reserve policymakers attempted to ease concerns, they could not guarantee against sudden policy shifts by President Trump. Recent US Treasury interventions to support the Japanese yen and lower borrowing costs were seen as particularly concerning, as they hinted at more intervention and a break from established norms.

European officials were particularly annoyed that the US did not inform them in advance of the euro sales as part of the yen transaction. The US has denied any intention of meddling, stating that the actions were taken to stabilize global financial markets. European central bankers are also worried about the administration's plan to increase buybacks of longer-dated bonds, which could require issuing more shorter-term maturities.

They fear this could set off market upheaval, potentially even leading to the termination of the Fed's dollar liquidity backstops, which are crucial to global financial stability.