Bank of Canada Governor Tiff Macklem came to the defense of U.S. Federal Reserve Chair Jerome Powell on Monday amid a criminal investigation initiated by President Donald Trump’s Justice Department. Powell revealed that the DOJ subpoenaed the Fed last week regarding his Senate testimony in June concerning a renovation project at Federal Reserve buildings in Washington, D.C. Powell suggested that the threat of criminal charges was in response to the independent monetary policies of the Fed, not aligning with Trump’s demands for interest rate cuts.
Macklem, who previously supported Powell in September amidst pressure from the Trump administration, issued a statement on Monday praising Powell’s commitment to public service and offering his full support. Macklem emphasized Powell’s effective leadership in making evidence-based monetary policy decisions rather than succumbing to political influence.
Both the Bank of Canada and the U.S. Federal Reserve operate autonomously to set interest rates with the goal of maintaining two percent annual inflation. The Fed also aims to foster maximum employment in the U.S. economy. Trump has criticized Powell for his perceived delay in reducing interest rates.
Macklem underscored 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 leading economists criticized the actions of the Trump administration, likening them to tactics used in developing nations.
Financial markets predicted that neither the Bank of Canada nor the U.S. Fed would lower interest rates at their upcoming meetings in January. Analysts suggested that the market’s subdued reaction reflected confidence in Powell’s ability to counter the allegations related to the Fed’s renovation project.
Trump has a history of leveraging investigations against his opponents, including Fed governor Lisa Cook, New York Attorney General Letitia James, and former FBI director James Comey. White House press secretary Karoline Leavitt stated that Trump did not instruct the Justice Department to investigate Powell but criticized Powell’s performance and left the determination of potential criminality to the DOJ.