On January 16, the Financial Times reported that the U.S. Department of Justice launched a criminal investigation into Federal Reserve Chairman Jerome Powell, sparking concerns among central banks worldwide about the cascading risks to the Fed's independence. This not only concerns the direction of U.S. monetary policy but also directly threatens currency swap agreements, a key crisis tool of the global financial system.
Swap agreements are a core mechanism by which the Federal Reserve provides dollar liquidity to other central banks during crises, playing a vital role as a "financial lifeline" multiple times, from the global financial crisis to the pandemic. However, the Trump administration's pressure on central banks has raised concerns that such tools may be politicized.
Last year, European officials discussed alternative solutions, reflecting growing concerns about the potential weaponization of reliance on dollar liquidity. Analysts point out that if the US ties swap agreements to geopolitical interests, global crisis response capabilities will face severe challenges.
