European officials question reliance on Fed funding stability

European officials are starting to question their reliance on the U.S. Federal Reserve (Fed) for dollar funding during financial stress. This concern has emerged due to recent policies from President Donald Trump's administration, including tariffs and a perceived shift in U.S. support for European security. According to six sources, some central banking officials in Europe have informally discussed the possibility that the Fed might not always honor its funding backstops. Although they believe it is unlikely the Fed would refuse this support, the discussions reflect a growing unease about U.S. government actions, including its stance on issues like Ukraine. In their conversations, European officials have considered where they might turn if they could not rely on the Fed. The Fed has been a crucial source of dollar funding, especially during market turmoil, but there are no good alternatives, as noted by these officials who requested anonymity. The Fed remains independent and has made no indications that it would limit its backstops. ECB President Christine Lagarde stated that the relationship with the Fed has not changed since Trump took office. Still, officials are analyzing vulnerabilities in the euro zone's financial system, including the reliance on the dollar. The dollar is essential for global trade, and during crises, financial entities often seek its safety. In recent instances, the Fed provided significant funding to prevent market failures, such as in the case of Credit Suisse in 2023. Despite European concerns, most officials believe it is very unlikely that the Fed would cut its funding lines, as this would have serious repercussions globally and could impact the U.S. economy as well. However, some officials worry that increased pressure from the Trump administration could influence the Fed's decisions in the future, raising further doubt about access to dollar credit lines.