Bank of Canada’s Governor Tiff Macklem recently voiced support for Federal Reserve Chair Jerome Powell amid a probe by the U.S. Justice Department initiated by President Donald Trump. Powell disclosed that the DOJ had issued a subpoena to the Fed following his testimony to the Senate regarding a renovation project at Federal Reserve premises in Washington, D.C.
Powell suggested 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 previously defended Powell in September amid mounting pressure from the Trump administration, reiterated his support for Powell, commending him for his dedication to evidence-based monetary policy decisions.
Highlighting the importance of central bank independence, Macklem emphasized that policymakers need the autonomy to make decisions that benefit the economy without political interference. The Bank of Canada and the U.S. Federal Reserve both operate autonomously from the government to regulate interest rates and maintain inflation at around two percent annually, with the Fed also tasked with bolstering employment in the U.S.
President Trump has criticized Powell for not implementing interest rate cuts swiftly enough. Macklem and a bipartisan group of former Fed chairs and economists likened the actions of the Trump administration to tactics observed in developing countries. Financial markets currently anticipate that neither the Bank of Canada nor the U.S. Fed will reduce interest rates at their upcoming meetings in January.
Speculation suggests that Powell could successfully refute allegations of criminal conduct related to his testimony on the Fed’s renovation project. Trump has a history of leveraging investigations against his adversaries, although it remains uncertain whether these probes will lead to actual indictments. White House press secretary Karoline Leavitt denied that Trump directed the DOJ to investigate Powell, stating that the department would determine the outcome of the inquiry independently.