Bank of Canada Governor Tiff Macklem defended Federal Reserve Chair Jerome Powell against allegations of criminal investigation by U.S. President Donald Trump’s Justice Department. Powell disclosed that the U.S. DOJ had issued a subpoena to the Fed related to his Senate testimony about a renovation project at Federal Reserve buildings in Washington, D.C.
Powell claimed that the potential criminal charges were a reaction to independent monetary policymakers in the U.S. declining to lower interest rates as per Trump’s requests. Macklem, who had previously supported Powell amid mounting pressure from the Trump administration, reiterated his backing for Powell, stating that the Fed chair exemplifies exceptional public service and has his full endorsement.
Emphasizing Powell’s effective leadership in making evidence-based monetary policy decisions, Macklem highlighted the importance of central bank independence in ensuring economic stability. Both the Bank of Canada and the U.S. Fed operate autonomously to regulate interest rates and maintain two percent inflation annually, with the Fed also tasked to enhance employment in the U.S. economy.
Criticism from Trump for Powell’s rate policy decisions has been ongoing, with Macklem asserting that central bank independence is crucial for making unbiased economic choices free from political interference. A bipartisan group of former Fed chairs and prominent economists likened the Trump administration’s actions to maneuvers seen in developing nations.
Financial markets anticipated no interest rate cuts from either the Bank of Canada or the U.S. Fed in their upcoming decisions at the end of January. Despite the allegations, analysts speculated that Powell would likely refute any criminal accusations regarding his testimony on the Fed’s renovation project. Trump’s utilization of investigations as a tool against political adversaries has been evident, including targets like Fed governor Lisa Cook, New York Attorney General Letitia James, and former FBI director James Comey.
White House press secretary Karoline Leavitt clarified that Trump did not instruct the Justice Department to probe Powell. Leavitt reiterated Trump’s criticism of Powell’s performance but left the determination of criminality to the DOJ’s investigation process.
