JACKSON HOLE, Wyoming. European central bankers departed this year’s annual gathering in Wyoming shaken by what they perceive as a breakdown in transatlantic financial cooperation, with several warning that turbulence with Washington may only intensify.
Fed officials spent much of the conference attempting to calm their counterparts, pledging to uphold existing commitments. Yet those assurances carried limited weight given the central bank’s separation from the White House. More than half a dozen policymakers speaking on the sidelines of the Kansas City Fed’s Jackson Hole Economic Symposium said they could not rule out abrupt policy shifts driven by President Donald Trump.
Two recent Treasury actions fueled the anxiety. The August 1 yen intervention involved selling euros to purchase Japanese currency. Treasury Secretary Scott Bessent later characterized the move as “just a reallocation of resources” and confirmed the foreign exchange assets came from the Exchange Stabilization Fund. On Friday, he sought to minimize concerns.
European officials told Reuters they received no customary advance notice that euro sales formed part of that transaction. “That was infuriating,” one source said. “You always pick up the phone and give heads-up.” Another added: “The message to me is that the U.S. does whatever it wants.”
Some attendees offered a more charitable reading, suggesting the unusual nature of the operation made the missed communication an honest error. Spokespeople for both the European Central Bank and the Federal Reserve declined to comment.
Bessent’s push to expand buybacks of longer-dated Treasuries has also drawn scrutiny. European policymakers worry that financing those purchases through additional short-term issuance signals a willingness to deploy unconventional measures to suppress 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 Treasury has pushed back, insisting the buybacks aim to improve liquidity in longer-dated sectors and do not constitute monetary policy or an interest rate cap. However, a Treasury official told reporters Thursday that the department was “really focused on bringing those long-end yields lower.”
Some European officials harbor deeper fears about the Fed’s dollar swap lines, the liquidity backstops available to major central banks during periods of market stress. No indication exists that those facilities face immediate danger, and they operate solely under Federal Open Market Committee authority. Still, the sources questioned whether political pressure could eventually reach them. “Rationality doesn’t always prevail with this administration,” a third source said.
Fed Chair Kevin Warsh, who traveled to Europe shortly after assuming his role, has worked to maintain goodwill with foreign counterparts. In Jackson Hole, he posed for the traditional photo with Bank of Canada Governor Tiff Macklem, a small but meaningful gesture amid an escalating trade dispute between Washington and Ottawa.
