Market News

By Balazs Koranyi, Howard Schneider and Ann Saphir
JACKSON HOLE, Wyoming, Aug 30 (Reuters)

European central bankers are leaving the Federal Reserve’s annual Jackson Hole symposium increasingly concerned that established norms of international economic and central-bank cooperation are being weakened by recent U.S. policy actions.

Fed Officials Seek to Reassure European Counterparts

Federal Reserve policymakers sought to reassure their international counterparts that the Fed intends to honour its existing commitments and maintain established relationships.

However, because of the Federal Reserve's institutional separation from the U.S. administration, Fed officials could not provide guarantees against unexpected policy changes by President Donald Trump.

More than half a dozen officials attending the Kansas City Fed's annual Jackson Hole Economic Symposium expressed concerns about the future of the relationship with Washington.

U.S. Intervention in the Yen Raises Concerns

One of the biggest issues was the U.S. Treasury's recent intervention to support the Japanese yen.

Following the August 1 intervention, U.S. Treasury Secretary Scott Bessent confirmed that the Treasury had sold euros to purchase yen.

Bessent subsequently said the foreign-exchange assets used to purchase yen came from the Treasury's Exchange Stabilization Fund.

The Treasury described the transaction as an effort to counter disorderly movements in the yen and support stability in global financial markets.

Europeans Upset Over Lack of Warning

European officials were particularly concerned that Washington apparently failed to provide the customary advance notification that euros would be sold as part of the intervention.

One official described the failure to provide a warning as “infuriating,” arguing that governments would normally communicate before undertaking such an operation.

For some European policymakers, the incident raised a broader concern that Washington is becoming increasingly willing to act unilaterally in global financial markets.

Other officials were more sympathetic, suggesting that because the transaction was highly unusual, the failure to notify European counterparts could simply have been an oversight.

The European Central Bank and Federal Reserve declined to comment.

Treasury Defends U.S.-Japan Intervention

A U.S. official said the intervention was specifically intended to address disorderly movements in the yen and promote stability in global financial markets.

The official stressed that the operation was not directed against Europe or other countries and said the Treasury continues to communicate closely with international counterparts.

Debt Buyback Strategy Creates Further Concern

European central bankers are also concerned about Bessent's plans to increase U.S. Treasury buybacks of longer-dated government bonds.

The transactions could potentially be financed through greater issuance of shorter-term Treasury securities.

European officials view the initiative alongside the yen intervention as evidence that the U.S. administration may be increasingly willing to use unconventional measures to influence financial markets and contain longer-term borrowing costs.

Why This Matters

The concerns emerging from Jackson Hole extend beyond individual Treasury operations. They centre on whether longstanding conventions governing international currency intervention, central-bank communication and government involvement in financial markets are changing.

For European policymakers, unexpected U.S. intervention could complicate management of the euro, bond yields and monetary policy, particularly if Washington increasingly pursues domestic financial objectives without the level of international coordination traditionally expected.