Bank of Canada Governor Tiff Macklem defended U.S. Federal Reserve Chair Jerome Powell on Monday amid a criminal investigation by U.S. President Donald Trump’s Justice Department. Powell revealed that the DOJ had subpoenaed the Fed last week over his testimony to the Senate in June regarding a renovation project at Federal Reserve buildings in Washington, D.C.
Powell suggested that the potential criminal charges were in retaliation for the independent stance taken by monetary policymakers in the U.S. against lowering interest rates as desired by Trump. Macklem, who had previously supported Powell in September amid increasing pressure from the Trump administration, affirmed his backing for Powell, stating that the Fed chair exemplifies excellent public service.
In a statement, Macklem praised Powell for making evidence-based monetary policy decisions rather than succumbing to political pressures. Both the Bank of Canada and the U.S. Fed operate independently to maintain annual inflation at two percent, with the Fed also tasked with enhancing employment in the U.S. economy.
Trump has criticized Powell for not swiftly reducing interest rates. Macklem emphasized the crucial role of central bank independence in ensuring price stability and enabling policymakers to make decisions in the best interest of the economy without political interference.
A bipartisan group of former Fed chairs and leading economists condemned the Trump administration’s actions, likening them to tactics seen in developing nations. Financial markets anticipated no interest rate cuts by either the Bank of Canada or the U.S. Fed at their upcoming decisions in January.
Analysts noted the market’s muted response, suggesting confidence that Powell could refute allegations that his statements about the Fed’s renovation project were criminal. Trump’s use of investigations to target political adversaries, such as Fed governor Lisa Cook and former FBI director James Comey, has been highlighted.
White House press secretary Karoline Leavitt stated that Trump did not instruct the Justice Department to investigate Powell. Leavitt reiterated Trump’s criticism of Powell’s performance but left the determination of criminality to the DOJ.