Global Central Bankers Face Rising Questions on Dollar Dominance at Sintra Summit

Top central bankers from the U.S., euro zone, Japan, Britain, and South Korea are gathering in Sintra, Portugal, for the European Central Bank’s annual Forum on Central Banking. While global inflation appears largely under control, the central theme of the summit is the future of the U.S. dollar’s dominance. Concerns are mounting that U.S. President Donald Trump’s protectionist stance and unpredictable policies could undermine the global monetary system that has been anchored to the dollar for eight decades.

Federal Reserve Chair Jerome Powell, expected to speak on Tuesday, is under heightened scrutiny amid pressure from Trump to cut interest rates. Although bolstered by a recent Supreme Court ruling affirming the Fed’s autonomy, Powell must navigate a divided policy committee and speculation that Trump may soon name his successor. Any signal of eroding Fed independence could further weaken confidence in the dollar, which is already nearing a four-year low against the euro.

ECB President Christine Lagarde will use the summit to promote the euro as a beacon of stability amid the dollar’s turbulence. Unlike her predecessor Mario Draghi, who battled fears of eurozone disintegration, Lagarde sees an opportunity for the euro to gain ground globally. However, economists caution that the EU’s limited political and military integration continues to hinder the euro’s potential to rival the dollar on the world stage.

Central bankers from Japan, South Korea, and the UK will also face difficult questions. The Bank of Japan remains hesitant to raise rates due to sticky inflation and looming U.S. tariffs. In South Korea, a property market upswing could prematurely end its easing cycle. Meanwhile, the Bank of England is split on whether slowing labor market indicators can tame persistent inflation from rapid wage growth.

As monetary officials deliberate in Sintra, markets are watching closely for signs of policy shifts or fracture points in global coordination. While the summit may not deliver immediate answers, it underscores growing uncertainty in the international financial order. Economists and strategists agree: with rising geopolitical risks and diverging national pressures, central banks must remain agile and attuned to a rapidly changing global landscape.

Source: Reuters