European Central Bankers Worry About Growing Tension With Washington

European central bank officials left this year’s Jackson Hole Economic Symposium still uneasy about the future of financial cooperation with the United States, despite reassurances from Federal Reserve leaders that existing commitments would be honored. Sources familiar with the discussions said Fed officials acknowledged they cannot guarantee against sudden policy changes coming from the White House, given the central bank’s independence from the administration.

Yen Intervention Sparks Frustration

A major point of tension involved a recent U.S. Treasury move to support the Japanese yen, which included selling euros without advance notice to European counterparts. Officials described the lack of a heads-up as unusual and frustrating, though some viewed it as a possible oversight given the transaction’s complexity. U.S. officials maintained the move was meant to stabilize disorderly currency markets and was not targeted at any specific country.

Bond Buyback Plans Raise Additional Concerns

European officials also expressed unease over Treasury plans to increase buybacks of longer-term government bonds, seeing it as another sign that U.S. policymakers may be willing to take unconventional steps to influence borrowing costs. U.S. officials pushed back, saying the buybacks were meant to improve market liquidity rather than function as a form of monetary policy.

Swap Lines Seen as a Long-Term Risk

A deeper worry among European officials centers on the dollar liquidity arrangements the Fed provides to major global central banks, which help maintain financial stability during periods of market stress. While there is no indication these arrangements are currently at risk, some officials fear escalating trade disputes could eventually threaten them. U.S. officials reiterated that decisions on these facilities remain solely within the Federal Reserve’s authority.

Despite these tensions, sources noted that new Fed Chair Kevin Warsh made efforts to build goodwill with European counterparts during the symposium, leaving what was described as a largely positive impression.