Pressure on the Fed reignites global jitters; Mexico watches the exchange rate, interest rates, and capital flows
A fresh escalation of tensions in the United States has once again put central bank independence at the center of the debate. In a joint statement, several former Federal Reserve (Fed) chairs criticized a criminal investigation involving the institution’s current leader, Jerome Powell, arguing that it amounts to an attempt to weaken the autonomy of the body responsible for monetary policy in the world’s largest economy.
The statement, signed by former Fed leaders such as Alan Greenspan, Ben Bernanke, and Janet Yellen, comes after Powell said the institution received subpoenas from the Department of Justice tied to his Senate testimony about an office renovation project. Powell framed the episode as part of a broader climate of political pressure aimed at forcing aggressive rate cuts, even as U.S. inflation remains above the 2% target.
In the background is the debate over the cost of money in the United States and how much real room the Fed has to make decisions without interference. President Donald Trump’s push to lower interest rates—and his direct criticism of Powell—added volatility to markets: at the start of the week, Wall Street showed weakness, the dollar lost ground against other currencies, and safe-haven assets like gold and silver got a fresh boost. The episode also created discomfort within the Republican Party itself, with lawmakers warning that a Fed seen as less independent could raise risks to financial stability.
For Mexico, the discussion hits close to home. Mexico’s economy operates in close sync with the U.S. financial cycle: the path of Fed rates influences the global cost of credit, risk appetite, and flows into emerging markets. If the Fed’s independence is called into question, markets typically demand higher risk premia, which can translate into bouts of exchange-rate volatility and shifts in financing costs for both governments and companies.
In the most immediate channel, a climate of uncertainty in the U.S. can put pressure on the peso versus the dollar, even during periods when Mexico’s fundamentals remain relatively solid. The exchange rate reflects not only trade and remittances; it’s also a portfolio “thermometer”: when risk aversion rises, investors tend to scale back exposure to emerging-market assets. In Mexico, that move affects import prices, expectations, and, in certain cases, inflation dynamics—particularly for goods and industrial inputs.
On the monetary policy front, the episode arrives as Banco de México (Banxico) seeks to guide inflation back toward its 3% target +/- one percentage point, in a context where the fight against price increases has shown signs of cooling but remains constrained by services inflation, supply shocks, and exchange-rate behavior. In practice, Banxico’s credibility and autonomy have served as an anchor for expectations; however, any noise in the external backdrop that unsettles markets can complicate the tradeoff between inflation, growth, and financial stability.
In addition, the situation comes as Mexico continues to benefit from the reshuffling of North American supply chains—the so-called nearshoring—a process that depends on international financial conditions and perceptions of macro stability. If global markets interpret that the United States is heading toward a less predictable monetary policy due to political pressure, the cost of capital could become more erratic. For Mexico, that could mean tighter project selection, more expensive financing for new plants or infrastructure, and greater investor sensitivity to local factors such as security, regulatory certainty, energy, and logistics.
On the fiscal and debt side, the signal matters as well. If the Fed loses credibility, Treasury yields could move more abruptly, and that typically transmits to yield curves in other countries. For Mexico—where the government manages a broad investor base in the local debt market and where domestic rates remain closely linked to external rates—a shift in the global “price” of money can affect refinancing costs, the interest bill in the budget, and credit conditions for the private sector.
Looking ahead, attention will be on two fronts: the political trajectory of the case in the United States and how markets react to any sign of interference at the Fed; and, on the Mexican side, the ability to keep inflation expectations anchored and to sustain a narrative of macro stability, with Banxico acting in a technical and predictable manner. In an environment where trade with the United States is the main external engine and financial integration runs deep, episodes that cast doubt on the Fed’s autonomy tend to amplify the region’s sensitivity to volatility shocks.
In sum, the conflict surrounding the Fed reopens a core issue for markets: central bank independence as a prerequisite for price stability and financial certainty. For Mexico, the main risk does not come from the legal case itself, but from its potential to shift expectations, move interest rates, and disrupt capital flows—with effects on the peso, credit, and the pace of investment at a moment when the country is trying to lock in opportunities tied to supply-chain relocation.
