We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell. The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability. Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him.
On the substance I think it is entirely appropriate for central bankers to be concerned when a central banker is threatened with prosecution on a fake pretext because he has refused to lower interest rates in line with the government’s preference. In NZ I have tut tutted both John Key and Christopher Luxon for even expressing a view on what they think the Reserve Bank should or will do. What Trump has done in the US is so far out of the mainstream, it can be in a different dimension.
If a country doesn’t want independent monetary policy, that is fine. You can change the law and have the President or Prime Minister set interest rates, like Muldoon used to do. It won’t be good for the economy, but you can do it. But if the law of the land says the Reserve Bank Governor should decide the official cash rate, and sets down the criteria they should use, then they should not be threatened with prosecution for simply following the law. And please don’t argue that the prosecution threat is unrelated to Powell’s interest rate decisions. If you truly believed that your IQ would be so low, that you would be unable to tie up your shoelaces.
So ơn the substance, I fully back Breman. It was the right call.
Should she have sought advice from MFAT, and advised at a minimum the Minister of Finance in advance? Yes.
Having said that, after getting advice from MFAT, she should have still signed the statement. But MFAT and the Foreign and Finance Ministers should have been aware of the decision, so they could manage any reaction to it – presumably emphasising the Reserve Bank is independent from the Government.
Some argue that the Reserve Bank has no role in talking about US domestic politics. But that misses the point. This isn’t about the US. It is about the terrible precedent that a central banker can be threatened with prosecution simply for following the law in doing their job in a democratic country.
I used to be on the board of .nz. If the Canadian Government threatened the manager of the .ca domain with arrest because they didn’t like decisions made by the .ca manager (CIRA), I’d damn well be signing a letter supporting the .ca manager. In countries that support the rule of law, you should not face criminal consequences because your decisions annoy the head of government.
I would also note that Jerome Powell has been backed by every Fed Reserve Chair since and including Alan Greenspan who served Presidents Reagan, Bush 1, Clinton and Bush 2.
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
If a country doesn’t want independent monetary policy, that is fine. You can change the law and have the President or Prime Minister set interest rates, like Muldoon used to do. It won’t be good for the economy, but you can do it. But if the law of the land says the Reserve Bank Governor should decide the official cash rate, and sets down the criteria they should use, then they should not be threatened with prosecution for simply following the law. And please don’t argue that the prosecution threat is unrelated to Powell’s interest rate decisions. If you truly believed that your IQ would be so low, that you would be unable to tie up your shoelaces.
So ơn the substance, I fully back Breman. It was the right call.
Should she have sought advice from MFAT, and advised at a minimum the Minister of Finance in advance? Yes.
Having said that, after getting advice from MFAT, she should have still signed the statement. But MFAT and the Foreign and Finance Ministers should have been aware of the decision, so they could manage any reaction to it – presumably emphasising the Reserve Bank is independent from the Government.
Some argue that the Reserve Bank has no role in talking about US domestic politics. But that misses the point. This isn’t about the US. It is about the terrible precedent that a central banker can be threatened with prosecution simply for following the law in doing their job in a democratic country.
I used to be on the board of .nz. If the Canadian Government threatened the manager of the .ca domain with arrest because they didn’t like decisions made by the .ca manager (CIRA), I’d damn well be signing a letter supporting the .ca manager. In countries that support the rule of law, you should not face criminal consequences because your decisions annoy the head of government.
I would also note that Jerome Powell has been backed by every Fed Reserve Chair since and including Alan Greenspan who served Presidents Reagan, Bush 1, Clinton and Bush 2.
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
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