Bank of Canada Governor Tiff Macklem has voiced strong support for U.S. Federal Reserve Chair Jerome Powell, as Powell faces a criminal investigation by the U.S. Department of Justice.
Powell said Sunday that the DOJ subpoenaed the Federal Reserve late last week in connection with testimony he gave to the U.S. Senate in June regarding a US$2.5 billion renovation project at Fed buildings in Washington, D.C. Powell suggested the potential criminal case stems from the Fed’s refusal to lower interest rates in line with President Donald Trump’s demands.
In a statement Monday, Macklem said Powell “reflects the very best in public service” and has his “full support,” adding that the Fed chair is making policy decisions based on evidence rather than political pressure.
“Chair Powell is doing a very good job under difficult circumstances,” Macklem said. “He is guiding the Fed to take monetary policy decisions based on evidence, not politics.”
Both the Bank of Canada and the U.S. Federal Reserve operate independently from government, setting interest rates to maintain inflation around two per cent. The Fed also has a dual mandate to promote maximum employment.
Trump has repeatedly criticized Powell for not cutting interest rates quickly enough to stimulate economic growth. Macklem said the independence of central banks is essential to maintaining price stability and allows policymakers to make difficult decisions “free from short-term political interference.”
A bipartisan group of former Fed chairs and economists compared the Trump administration’s actions to political interference seen in less-developed countries.
Financial markets currently expect neither the Bank of Canada nor the Fed to cut interest rates at their late-January meetings, according to LSEG Data & Analytics. Some analysts said the subdued market reaction reflects confidence that Powell will withstand the allegations.
Trump has frequently used investigations to target political opponents, including Fed Governor Lisa Cook, New York Attorney General Letitia James and former FBI director James Comey. White House Press Secretary Karoline Leavitt said Trump did not direct the DOJ to investigate Powell.
“The president’s made it quite clear that Jerome Powell is bad at his job,” Leavitt said. “As for whether or not Jerome Powell is a criminal, that’s something the Department of Justice will determine.”