LONDON, Jan 15 (Reuters) - A significant erosion of the Federal Reserve's independence would negatively impact the U.S. credit rating, according to Fitch's leading sovereign analyst on Thursday. The most critical concern is any indication that the dollar's position as the world's top currency could weaken.
This week, the Fed's independence has come under intense scrutiny. U.S. prosecutors have initiated an investigation into central bank head Jerome Powell regarding cost overruns for renovation work at the Fed's headquarters.
"A situation where you had complete politicization of a central bank would be credit negative," stated James Longsdon, head of sovereign ratings at Fitch. He explained that this principle applies to all countries, not just the United States.
"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.," Longsdon said.
"So anything that happens that were to materially weaken that would be negative for the rating," he told Reuters in an interview. Longsdon added that there are currently no signs of such a weakening occurring.