Banks Face Intense Pressure Under Populist Assault, According to Alex Brummer
In the financial landscape of mid-2025, both the Federal Reserve and the Bank of England are navigating through complex monetary policy decisions, each facing unique political pressures.
The Federal Reserve, under the leadership of Chairman Jay Powell, remains independent in its conduct of monetary policy. However, political tensions have risen, particularly under the influence of former President Donald Trump, who publicly criticised Powell and pressured the Fed to lower interest rates despite inflation concerns. Trump reportedly considered removing Powell, a move that would have posed a significant challenge to the Fed's independence. Despite this, the Fed's independence remains legally and institutionally protected, though political dynamics suggest elevated tension.
Currently, the Fed's interest rate range stands at 4.25% to 4.5%. The Fed has shown a cautious, data-driven approach, keeping rates steady in July 2025 amid inflation and tariff uncertainties. Notably, Powell has refused to yield to Trump's pressure to lower the interest rate.
Across the Atlantic, the Bank of England (BoE) continues to operate with established independence and less overt political interference. While there is no detailed 2025 data available, historically, the BoE operates independently with government coordination primarily in its inflation targeting and financial stability role.
However, the BoE's approach to quantitative tightening has drawn criticism. Richard Tice MP, a Reform apparatchik, is in dispute with Governor Andrew Bailey over this policy. Critics, including the Leftist New Economics Foundation, argue that the BoE's approach is costly and potentially triggers a crisis similar to the one experienced under Liz Truss.
Meanwhile, Chancellor Rachel Reeves and Governor Bailey of the Bank of England are currently at odds over City regulation. Nigel Farage's party, Reform, is leading in opinion polls, adding to the political pressure on the BoE.
In his memoir, Liz Truss is unforgiving of the role she claims Bailey played in her downfall. Bailey, known to be dismissive of the short-lived administration of Liz Truss, points out that the Bank booked an earlier £124 billion profit on its gilt purchases and, for the moment, the Government is £34 billion up.
Amid these challenges, the credibility and independence of both financial institutions are under scrutiny from critics on both the Left and the Right. Echoes of Donald Trump's attacks on the Federal Reserve can be heard in this dispute, as Trump continues to attack Chairman Powell for not lowering the key federal funds interest rate.
As these financial giants continue to make critical decisions, the balance between political pressure and monetary policy independence remains a crucial factor to watch.
- The Federal Reserve and Bank of England, despite their respective independencies, are experiencing political pressures in their monetary policy decisions in mid-2025.
- Notably, Chairman Jay Powell of the Federal Reserve has refused to lower interest rates in response to public criticism from former President Donald Trump, escalating the political tensions.
- In the UK, Governor Andrew Bailey of the Bank of England is facing criticism over the bank's approach to quantitative tightening, with critics arguing it could trigger a financial crisis similar to the one seen under Liz Truss.
