European central bankers left their annual meeting with US counterparts in Jackson Hole, Wyoming, far from reassured about the future of long-standing norms in global financial cooperation, according to sources familiar with the discussions. Instead, they were concerned that further turbulence could lie ahead for an already difficult relationship with Washington.
Federal Reserve policymakers made efforts during the week to ease those concerns, assuring their European counterparts that the Fed would honour all of its commitments. But more than half a dozen officials attending the Kansas City Fed’s annual Jackson Hole Economic Symposium said the separation between the central bank and the US administration meant they could offer no guarantees against sudden policy shifts by President Donald Trump.
European officials were particularly concerned by recent interventions by the US Treasury, including measures to support the Japanese yen and efforts to lower longer-term US borrowing costs. They viewed the moves as potential signs that Washington was becoming more willing to depart from established practices and intervene directly in financial markets.
Following the August 1 yen transaction, US Treasury Secretary Scott Bessent confirmed that the Treasury had sold euros for the Japanese currency. He said he had reassured regional central banks that the transaction was “just a reallocation of resources”. On Friday, Bessent said the foreign exchange assets used to purchase yen had come from the Treasury’s Exchange Stabilization Fund.
The lack of advance notification particularly angered some European officials because the United States had not provided the customary warning that euro sales were involved in the transaction. One source described the omission as “infuriating”, saying that central banks normally “always pick up the phone and give heads-up”.
Another source said the episode sent a troubling message: “The message to me is that the U.S. does whatever it wants.” Others were more forgiving, suggesting that the unusual nature of the transaction could mean the failure to notify European counterparts was an honest oversight.
A US official said the intervention had been carried out to counter disorderly movements in the yen and support stability in global financial markets. “It was not directed at anyone else,” the official said, adding that the Treasury maintained close and ongoing communication with international counterparts but did not comment on operational details.
European central bankers were also concerned about Bessent’s plan to increase buybacks of longer-dated US government bonds. Such transactions could require the Treasury to issue more shorter-term debt, while raising concerns in Europe that Washington was prepared to use unconventional measures to contain borrowing costs.
“These interventions normally offer just temporary relief,” a second source said. “But they are clearly worried. So what is next? Will they put pressure on the Fed to start buying bonds on the market?”
The concern extends to the potential impact on the Federal Reserve’s independence. Although the Fed is designed to operate independently of the elected administration in setting monetary policy, officials said Trump had demonstrated a willingness to pursue extraordinary measures to achieve his objectives. They feared that political pressure could trigger market upheaval extending well beyond the United States.
The US official rejected the suggestion that the bond buybacks represented monetary policy or an attempt to impose an interest-rate ceiling, saying they were intended to provide greater liquidity in longer-dated Treasury markets. A Treasury official, however, said on Thursday that the department was “really focused on bringing those long-end yields lower” because they had risen above what it considered “fair value”.
European officials also raised concerns about the future of the dollar liquidity swap lines maintained by the Federal Reserve with major central banks. These facilities are regarded as a cornerstone of global financial stability because they help ensure that banks outside the United States retain access to dollars during periods of financial stress.
There was no indication that the swap lines were at risk, and the sources continued to expect them to remain unchanged. The facilities are authorised by the Federal Open Market Committee and operated exclusively by the Fed rather than the administration.
Despite the concerns, Fed Chairman Kevin Warsh was said to have made efforts to strengthen relations with European officials during his first Jackson Hole conference as Fed leader. He also travelled to Europe just over a month into his tenure and left a predominantly positive impression. At Jackson Hole, he joined Bank of Canada Governor Tiff Macklem for the customary conference photograph, a small but notable gesture as Trump’s administration remains locked in an escalating trade conflict with Canada.
