Bank of Canada Governor Tiff Macklem defended U.S. Federal Reserve Chair Jerome Powell amid a criminal investigation by President Donald Trump’s Justice Department. Powell disclosed that the DOJ had issued a subpoena to the Fed regarding his Senate testimony on a renovation project at Federal Reserve buildings in Washington, D.C.
Powell suggested that the threat of criminal charges was a reaction to independent monetary policymakers like him refusing to comply with Trump’s demands to lower interest rates. Macklem, who previously supported Powell in September amid pressure from the Trump administration, stated on Monday that Powell exemplifies excellence in public service and has Macklem’s full backing.
Macklem praised Powell for making sound monetary policy decisions based on evidence rather than political pressure, noting the challenging circumstances under which Powell operates. Both the Bank of Canada and the U.S. Federal Reserve operate independently to maintain two percent annual inflation rates, with the Fed also aiming to boost employment in the U.S. economy.
Trump has criticized Powell for not reducing interest rates swiftly enough. Macklem emphasized the importance of central bank independence in ensuring price stability and enabling policymakers to make decisions that benefit the economy without political interference.
A bipartisan group of former Fed chairs and prominent economists likened the Trump administration’s actions to tactics employed in developing nations. Financial markets do not anticipate rate cuts by either the Bank of Canada or the U.S. Fed at their upcoming decisions in January, with analysts suggesting that Powell may effectively refute the criminal allegations related to the Fed’s renovation project.
Trump has a history of using investigations as a tool to attack his adversaries, such as 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 directly order the DOJ to investigate Powell, emphasizing Trump’s dissatisfaction with Powell’s performance.
Ultimately, the situation underscores the delicate balance between political pressures and the independence of central banks in monetary policy decision-making.