Fed under fire, peso under pressure as BSP weighs next rate (1)

The clash between the US Justice Department and the Federal Reserve has triggered a political firestorm and renewed debate over central bank independence, drawing warnings from Wall Street leaders about the economic costs of perceived interference in monetary policy.

JPMorgan Chase chief executive Jamie Dimon emerged this week as one of the most vocal defenders of central bank independence after the DoJ issued grand jury subpoenas involving the Federal Reserve, following disclosures by Fed Chair Jerome Powell linked to his testimony on the central bank’s Washington building renovation. 

Dimon warned that “anything that chips away” at the Fed’s independence is “not a good idea,” arguing it could lift inflation expectations and interest rates — the opposite of what the administration wants as it pushes for lower borrowing costs.

While the standoff is unfolding in Washington, its implications resonate beyond the United States. For emerging markets such as the Philippines, where monetary credibility anchors inflation expectations, capital flows, and exchange-rate stability, the episode serves as a cautionary parallel at a time when domestic economic management is under heightened scrutiny.

A warning from Wall Street

Dimon’s remarks came after Powell disclosed that the Fed had received grand jury subpoenas related to a multiyear renovation project, triggering backlash from former central bankers and finance officials across party lines. Powell has described the investigation as a “pretext” tied to political pressure over interest rates.

Dimon said political interference with the Fed would ultimately push inflation and borrowing costs higher. While acknowledging disagreements with some Fed actions, he stressed his “enormous respect” for Powell and the institution’s independence — a view echoed by other bank executives and former US officials who warned that weakening central bank autonomy risks broader financial instability.

Peso under pressure as global risks mount

The global backdrop has coincided with renewed pressure on the Philippine peso, which briefly hit an all-time low of P59.46 against the dollar this week.

During a Palace briefing on Thursday, Presidential Communications Office spokesperson Claire Castro said the peso’s weakness was driven largely by global and domestic developments, including the strengthening of the US dollar, market speculation over possible US Federal Reserve rate cuts, and heightened geopolitical tensions — particularly between the United States and Venezuela.

Castro said President Ferdinand Marcos Jr. holds regular meetings with the Bangko Sentral ng Pilipinas, which continues to closely monitor peso-dollar movements. For now, she said, the central bank remains confident that no immediate market intervention is needed.