JACKSON HOLE, Wyoming - European central bankers left the annual meeting with U.S. counterparts with lingering doubts about the durability of long-standing cooperative norms and with growing concern that further turbulence could lie ahead for an already testy transatlantic relationship, participants said.
Officials attending the Kansas City Fed's Jackson Hole Economic Symposium reported that Federal Reserve policymakers made concerted efforts during the gathering to calm European counterparts, reiterating a commitment to existing arrangements. Still, sources said the separation between the Fed and the U.S. administration limited what Washington's central bankers could promise - particularly in the face of policy actions originating from the executive branch.
At the center of the unease were recent interventions by the U.S. Treasury - notably a transaction to support the Japanese yen and steps aimed at lowering longer-term U.S. borrowing costs. Several European officials said those moves raised concerns because they suggested the administration might take further interventions that depart from past norms.
Following the August 1 operation involving the yen, Treasury Secretary Scott Bessent confirmed that the department had sold euros to acquire yen and described the action as "just a reallocation of resources." On Friday he said the foreign exchange assets used to buy yen were drawn from the Treasury's Exchange Stabilization Fund. Some European officials bristled that they had not received the customary advance notification that euro sales were part of the transaction.
"That was infuriating," one official said. "You always pick up the phone and give heads-up." Another attendee summarized the sentiment more bluntly: "The message to me is that the U.S. does whatever it wants." Other participants were more conciliatory, noting the intervention's unusual nature could explain a genuine oversight.
Spokespeople for both the European Central Bank and the Federal Reserve declined to comment on the discussions. A U.S. official defended the U.S.-Japan intervention, saying it was undertaken to counter disorderly movements in the yen and to support stability in global financial markets. "It was not directed at anyone else," the official said. The same official added that "Treasury maintains close and ongoing communication with our international counterparts, but we do not comment on the operational details of those discussions."
Beyond the foreign exchange operation, European central bankers said they were troubled by Treasury plans to step up buybacks of longer-dated U.S. government bonds - transactions that may require issuance of additional shorter-term maturities to finance the purchases. Officials viewed that approach as another sign the administration was willing to deploy unconventional measures to pressure borrowing costs lower.
"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 concern, as expressed by several participants, was that such a dynamic could create market disruptions extending well beyond U.S. shores.
U.S. officials pushed back on the notion that the buybacks represented an attempt at monetary-style intervention. One official said the increased long-end buybacks were intended to provide greater liquidity in longer-dated sectors where the Treasury was receiving high-quality buyback offers. "They are not monetary policy or an effort to impose a cap on interest rates," the official said.
Nonetheless, the Treasury's public remarks were at times more explicit about the objective. On Thursday, another Treasury official told reporters the department was "really focused on bringing those long-end yields lower" because they had risen above what the department saw as "fair value." That wording reinforced European unease about an administration prepared to take steps outside of traditional fiscal practice to influence market outcomes.
Another significant worry articulated by European participants was the potential for political considerations to intrude on the dollar liquidity backstops provided by Federal Reserve swap lines - facilities regarded by attendees as a cornerstone of global financial stability. These swap arrangements help ensure overseas commercial banks maintain access to U.S. dollars during episodes of stress, reducing the likelihood they would be forced to dump U.S. bonds and amplify market turmoil.
"But rationality doesn't always prevail with this administration," a third source said. "When they run retaliatory trade policies with their closest allies, Trump could just say, 'Hey, they're ripping us off' and the swap lines could be gone overnight." That remark captured a fear that political tensions might one day translate into threats to institutions that underpin dollar liquidity in crises.
At the same time, the sources stressed there had been no indication those backstops were actually at risk. Participants said they still expected the swap lines to remain unchanged. The arrangements are authorized by the Federal Open Market Committee and operated by the Fed, not by the Treasury or the administration.
"Decisions concerning Federal Reserve facilities and swap-line arrangements rest with the Federal Reserve," the Treasury official said. "Nothing Treasury has announced regarding either yen operations or debt buybacks suggests otherwise." The official added that Secretary Bessent looked forward to discussing financial stability matters with G20 finance ministers and central bank governors at gatherings in Asheville, North Carolina, where the administration planned to press an agenda that included isolating Iran, fostering growth and addressing global imbalances.
Outside the specific points of contention, attendees noted gestures meant to preserve ties. Fed Chairman Kevin Warsh traveled to Europe a little over a month into his tenure and made efforts to cultivate constructive relations there, leaving a generally positive impression among counterparts, sources said. In his first Jackson Hole conference as Fed leader, he also posed for the customary photograph with Bank of Canada Governor Tiff Macklem - a small but noteworthy act, attendees said, given the administration's escalating and bitter trade dispute with Canada.
Overall, participants described a mix of reassurance and unease. While central bankers emphasized institutional independence and the continuing authority of the Fed over monetary facilities, the recent actions by the Treasury and the administration's posture left European officials wary about the potential for unexpected policy moves that could reverberate through currency markets, bond markets and the platforms that underpin dollar liquidity globally.