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The independence of the US and the UK Bank is in urgent need of! Political intervention is shrouded in darkness, can financial stability be maintained?
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Hello everyone, today XM Foreign Exchange will bring you "【XM Group】: The independence of the US and the UK Bank is in urgent need! Political intervention is shrouded in the clouds, can financial stability be maintained?" Hope it will be helpful to you! The original content is as follows:
At a time when the global economy is changing, the independence of central banks is facing unprecedented challenges. U.S. President Trump's public attack on the Fed and the British Reform Party's doubts about the Bank of England have caused deep concerns about whether the central bank can continue to operate independently. Whether it is the Federal Reserve or the Bank of England, traces of political intervention are becoming increasingly apparent, which may not only shake the stability of financial markets, but also have a profound impact on the global economic governance system.
1. Federal Reserve: Trump's open challenge and market anxiety
Trump's artillery fire: directed at Federal Reserve Chairman Powell
In recent years, US President Trump's criticism of the Federal Reserve has never stopped. He repeatedly publicly demanded that Federal Reserve Chairman Powell cut interest rates sharply, and even made it clear through social media in April 2025 that Powell should be fired "as soon as possible" and hinted that he would appoint a successor who was more in line with his policy philosophy after the end of Powell's term. Such open pressure is rare in American history. Since the Federal Reserve broke away from the Treasury Department to achieve independence in 1951, although successive presidents have tried to influence their policies, Trump's straightforwardness and high profile undoubtedly disturbed the market. Especially as he promotes trade policies that may lead to rising inflation, he also requires the Federal Reserve to lower interest rates. This contradictory policy stance makes investors full of doubts about the prospects of the US economy.
Market reaction: From shock to numbness
Trump's remarks once caused fluctuations in the U.S. bond market, and investors were worried that the Fed's independence might be eroded. However, over time, the market seems to gradually adapt to Trump's "verbal intervention"”. Many investors believe that although he is fierce, he may retreat when taking real destructive actions. Still, relying solely on this “adaptation” of the market to ensure the independence of the Fed is clearly not enough. Historical experience shows that independent monetary policy can better control prices, as politicians tend to stimulate short-term economic growth through low interest rates and ignore long-term inflation risks. Currently, the U.S. inflation has gradually fallen back to near the target level, but Trump’s continued pressure may put this result in jeopardy.
The Fed’s response: Return to strict inflation targets
In order to cope with political pressure, the Fed needs to take tougher defensive measures before Powell’s 2026 term ends. An important opportunity will be in the present day. The Fed will announce the results of its regular strategic assessment. The last assessment introduced a more flexible inflation target in 2020, allowing inflation to be moderately above the target for a certain period of time to balance the previous low inflation period. However, in the current political environment, this flexibility may be an excuse for Trump to attack the Fed. Therefore, the Fed may consider returning to a stricter inflation target and clearly conveying to the public its first task to alleviate the high cost of living pressures since 2021. This move will not only enhance the Fed's policy credibility, but also provide it with a more solid, legitimate and unconcealed position in the face of political intervention.
2. Bank of England: Fiscal pressure and call for reform
Reform Party Questions: Reserves Interest and government intervention
Over the Atlantic, the Bank of England is also under pressure from political scrutiny. The British Reform Party has continued to rise in recent years, and the Party criticized the Bank of England's payment of reserve interest to www.xmhouses.commercial banks for wasting billions of pounds of taxpayer funds and proposed to join government officials in the monetary policy www.xmhouses.committee. This view has sparked widespread controversy. Bank of England Governor Bailey refuted this through an open letter, pointing out that the cancellation of reserve interest will weaken the transmission effect of monetary policy on the real economy, forcing www.xmhouses.commercial banks to reduce reserves, which may trigger financial stability risks. He also emphasized the long-term benefits of quantitative easing and argued that its costs are controllable. However, the reform party's proposal reflects a "fiscal-led" concern. That is, high government debt may force the central bank to adjust its policies to cater to fiscal demand. Once this trend appears, investors may suspect that interest rate decisions are affected by political intervention, which will cause a serious blow to market confidence.
Earn urgently: Redefining central bank functions
The last time the British government conducted a www.xmhouses.comprehensive review of the Bank of England functions was ten years ago. Given the impact of major events such as Brexit, the COVID-19 pandemic and the cost of living crisis in recent years, the time to revisit central bank functions is ripe. This is not only in response to criticism from skeptics such as the Reform Party, but also in order to clarify the central bank's goals and tools available. The review should cover the diversity of the thinking of the Monetary Policy www.xmhouses.committee, the central bank's responsibilities to parliament and the public, between monetary policy and financial stabilitythe balance of the central bank and the www.xmhouses.communication methods. In addition, quantitative easing, as an unprecedented policy attempt, is still controversial in its effects and long-term impact. With the Bank of England approaching its ideal minimum reserve range, it is a great time to assess the effectiveness of quantitative easing and quantitative austerity policies and www.xmhouses.communicate the results clearly to the public.
www.xmhouses.complexity of the political environment
Three years ago, the then-British Prime Minister Trass's budget triggered a violent market reaction, and she publicly criticized the Bank of England for failing to foresee market turmoil. Now, Finance Minister Reeves promises not to interfere with the independence of the central bank, providing a certain breathing space for the central bank. However, future political leaders may not necessarily continue this position. As former Bank of England Vice President Tucker said, the best way for the central bank to maintain independence is to "do its job well, adhere to its statutory responsibilities, and explain it to the public in the clearest way." However, against the backdrop of increasing political pressure, whether the central bank can continue to maintain its independence remains an unsolved mystery.
3. The future path to defend the independence of the central bank
Strengthening www.xmhouses.communication and public trust
Whether it is the Federal Reserve or the Bank of England, strengthening www.xmhouses.communication with the public is the key to maintaining independence. The Fed needs to regain public confidence in controlling the cost of living through clear inflation targets and transparent policy explanations. The Bank of England needs to pass a www.xmhouses.comprehensive review to resolve the outside world’s doubts about the reserve system and quantitative easing, and to show the public the scientificity and independence of its decision-making to the public with a more open attitude. Clear www.xmhouses.communication can not only enhance the legitimacy of the central bank, but also reduce the space for political intervention.
The balance between market and government
The core of central bank independence lies in balancing market expectations and government needs. Both the Federal Reserve and the Bank of England need to adhere to their professionalism in policy making and avoid being driven by short-term political goals. At the same time, as an external supervision force, the market should also play a greater role to ensure that the central bank's policies are not politicized. However, relying solely on market constraints is not enough. The central bank must actively defend its independent status through institutional reform and strong policy implementation.
The far-reaching significance of global influence
As the core of the global financial system, the independence of the central bank is not only related to the stability of the country's economy, but also has a far-reaching impact on the global financial market. Once the independence of the central bank is eroded, it may trigger a chain reaction, leading to a decline in global investor confidence, abnormal capital flows, and even threatening the stability of the international monetary system. Therefore, defending the independence of the central bank is not only an internal matter between the United States and the United Kingdom, but also a global issue.
Summary: The independence of the central bank cannot be lost
The Federal Reserve and the Bank of England are standing at the crossroads of political intervention. Trump's open attacks on the Fed and the UK's reform party's doubts about the central bank's policy highlight the severe challenges facing central bank independence. To cope with these pressures, the central banks of the two countries need to rebuild markets and public trust through clear inflation targets, www.xmhouses.comprehensive functional review and transparent public www.xmhouses.communication. Increasing global economic uncertaintyIn the context, defending the independence of the central bank is not only a need to maintain domestic financial stability, but also a key step in ensuring the global economic order. In the future, whether the central bank can withstand political pressure and continue to play the role of the economic "guardian" is worthy of close attention.
The above content is all about "[XM Group]: The independence of the Bank of the United States and the United Kingdom is in urgent need of! Political intervention is shrouded in the clouds, can financial stability be maintained?" It is carefully www.xmhouses.compiled and edited by the editor of XM Forex. I hope it will be helpful to your transactions! Thanks for the support!
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