Erosion of Fed independence would be ‘credit negative’ for US rating, Fitch says

LONDON, Jan 15 (Reuters) – A major erosion of the Federal Reserve’s independence would be negative for the U.S. credit rating, Fitch’s top sovereign analyst said on Thursday, with any sign that the dollar’s top global currency crown could slip the most critical issue.

The independence of the Fed has been thrown squarely into the spotlight this week after U.S. prosecutors launched an investigation into the central bank’s head Jerome Powell over cost overruns to refurbishment work at its headquarters.

“A situation where you had complete politicization of a central bank would be credit negative,” Fitch’s head of sovereign ratings James Longsdon said, explaining that it was a principle that stood for all countries, not just the U.S.

“What matters for the (U.S.) rating is strong conviction in the strength of the dollar as a reserve currency, and therefore in the financial flexibility of the U.S.”

“So anything that happens that were to materially weaken that would be negative for the rating,” Longsdon told Reuters in an interview, adding there were no signs of it happening currently.

(Reporting by Marc Jones; Editing by Susan Fenton)