Foreign Minister Winston Peters has hit out at Reserve Bank Governor Anna Breman for signing an international statement defending the US Federal Reserve chair, saying she should "stay in her New Zealand lane".
The rebuke comes after Breman signed a solidarity statement supporting Jerome Powell, whose central bank has faced threats of investigation and possible criminal charges from president Donald Trump's Justice Department.
In a tweet, Peters commented on Breman choosing to co-sign the statement.
"The Reserve Bank of New Zealand (RBNZ) is statutorily independent of central Government on matters of monetary policy. However, the RBNZ has no role, nor should it involve itself, in US domestic politics," the Foreign Minister said in a statement.
"We remind the Governor to stay in her New Zealand lane and stick to domestic monetary policy. That would have been the advice of the Ministry of Foreign Affairs and Trade if the Governor had sought its advice, which she did not."
Breman has been approached for comment through the Reserve Bank.
The statement, signed by central bank heads from around the world including the Reserve Bank of Australia, Bank of Canada, and Bank of England, pledged "full solidarity" with Powell after Trump's administration threatened America's central bank.
Powell "has served with integrity, focused on his mandate and an unwavering commitment to the public interest," read the statement.
The signatories added that "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."
The dispute is ostensibly about Powell’s testimony to the US Congress in June over the cost of a massive renovation of Federal Reserve buildings. But in a statement on Monday, Powell abandoned his previous attempt to ignore Trump’s relentless criticism.
He called the administration’s threat of criminal charges “pretexts’’ in a campaign to seize control of US interest rate policy from the Federal Reserve's technocrats.
Trump has repeatedly criticised Powell and the Federal Reserve, commonly referred to as the Fed, for not moving faster to cut interest rates.
Breman has only been in her role as Reserve Bank Governor for a little over a month.
Former RBNZ Governor: Trump's pressure could backfire
Former Reserve Bank Governor Don Brash told 1News he was relieved to see Breman's name on the list of signatories.
Brash said the statement reflected both solidarity with Powell, whom he described as a "highly regarded chairman", and a warning that the Trump administration's apparent tactics could prove counterproductive.
He noted that previous living Federal Reserve governors have come out in support of Powell, along with several former Treasury secretaries.
"This is the kind of thing that's done in some developing countries and countries which have not got an established central bank, but it's a very long time since it happened in the United States," Brash said.
He added: "If Donald Trump wants to get interest rates down, the last thing he should be doing is putting pressure on Jerome Powell.
"By putting pressure on him, conceivably he could reduce short-term interest rates, and that might be a benefit to Donald Trump, but the likelihood is that the perception that the Fed is being bullied by the president is more likely to increase bond rates."
US interest rate moves have impacts around the world
Economists warn that a politicised Fed that caves in to the president’s demands will damage its credibility as an inflation fighter and likely lead investors to demand higher rates before investing in US Treasurys.
Fed actions have impacts around the world due to the US dollar's role as the leading currency for trade transactions and central bank reserves.
Fed interest rate changes can affect the dollar's exchange rate against other currencies and the value of foreign investors′ US assets.
Politically independent central banks have become a cornerstone of the global economy because they can more easily take steps to fight inflation, such as rate hikes, that are unpopular in the short term but preserve price stability over the longer term.
Other signatories of the statement carried on the European Central Bank's website were European Central Bank President Christine Lagarde, Erik Thedeen, governor of Sweden's central bank; Christian Kettel Thomsen, chair of Denmark's central bank; Swiss National Bank Chair Martin Schlegel; Michele Bullock, governor of the Reserve Bank of Australia; Tiff Macklem, governor of the Bank of Canada; Bank of Korea Governor Chang Yong Rhee; and Gabriel Galipolo, governor of the Banco Central do Brasil.
Also attaching their names were François Villeroy de Galhau, board chair of the Bank for International Settlements, and Pablo Hernández de Cos, BIS general manager.
The BIS is an international organisation of central banks based in Basel, Switzerland.
One prominent central bank not included in the statement was the Bank of Japan. Bank of Japan officials could not immediately be reached for comment.
The joint statement said that more signatures could be added later.
— additional reporting by the Associated Press
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