Bank of Canada Governor Tiff Macklem has defended U.S. Federal Reserve Chair Jerome Powell amid a probe initiated by U.S. President Donald Trump’s Justice Department. Powell disclosed that the DOJ issued a subpoena to the Fed last week regarding his Senate testimony in June on a renovation project for Federal Reserve buildings in Washington, D.C. Powell suggested that the potential indictment was a backlash against independent monetary policymakers for resisting pressure to lower interest rates as per Trump’s demands.
Macklem, who previously voiced support for Powell in September amidst escalating pressure from the Trump administration, reiterated his stance on Monday, praising Powell for exemplifying outstanding public service and receiving his full backing. Macklem emphasized Powell’s effective management of the Fed under challenging circumstances, emphasizing evidence-based monetary policy decisions over political influence.
Both the Bank of Canada and the U.S. Federal Reserve operate autonomously from the government, aiming to maintain two percent inflation annually, with the Fed additionally tasked with promoting maximum employment in the U.S. economy. Trump has criticized Powell for not rapidly reducing interest rates.
Macklem underscored the vital role of central bank independence in ensuring price stability and enabling policymakers to make impactful economic decisions free from immediate political intervention. On Monday, a bipartisan group of former Fed chairs and prominent economists likened the Trump administration’s actions to those seen in developing nations.
Market expectations, as of Monday, did not anticipate interest rate cuts by the Bank of Canada or the U.S. Fed in their imminent decisions by the end of January, according to LSEG Data & Analytics. Analysts noted the subdued market response, indicating widespread confidence in Powell’s ability to refute allegations regarding his communication on the Fed’s $2.5 billion U.S. project to lawmakers as potentially criminal.
Trump’s utilization of investigations, often without resulting in actual indictments, to target political adversaries, including Fed governor Lisa Cook, New York Attorney General Letitia James, and former FBI director James Comey, has been recurrent. White House press secretary Karoline Leavitt emphasized that Trump did not instruct the Justice Department to probe Powell, stating that the President’s opinion of Powell’s performance contrasts with potential criminal implications which the DOJ will investigate independently.
