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

Europe's central bankers expressed deep concern during the annual Jackson Hole Economic Symposium, with their American counterparts far from reassuring them that global cooperation norms remain intact. Federal Reserve officials went out of their way to ease concerns, promising to honor all commitments, but could not guarantee against sudden policy shifts by President Trump.

Recent U.S. Treasury interventions, such as the Japanese yen transaction and lower longer-term borrowing costs, raised fears of more intervention and a departure from established norms. European officials were particularly angered by the U.S. not providing a heads-up for euro sales during the yen transaction. While some officials expressed forgiveness, viewing the transaction as an honest oversight, others emphasized its unusual nature.

The U.S. Treasury maintained that the yen purchase was merely a reallocation of resources, but European officials remained highly perturbed by the lack of communication. The European Central Bank and Federal Reserve declined to comment, while a U.S. official stated that U.S.-Japan interventions aimed to counter disorderly movements in the yen and support market stability.

European central bankers' concerns extended to potential political meddling involving the dollar liquidity backstops provided by the Fed to the world's biggest central banks. The Fed's swap lines, authorized by the Federal Open Market Committee and operated by the Fed, were seen as crucial for maintaining global financial stability.

However, the sources noted that there had been no hint of a threat to these backstops, and they remained confident they would continue unchanged.