Bank of Canada Governor Tiff Macklem stood up for Federal Reserve Chair Jerome Powell on Monday amid reports of a criminal investigation initiated by U.S. President Donald Trump’s Justice Department. Powell disclosed that the DOJ had issued a subpoena to the Fed last week regarding his testimony to the Senate in June about a renovation project for Federal Reserve buildings in Washington, D.C.
Powell suggested that the potential criminal charges were a reaction to independent monetary policymakers in the U.S. not adhering to Trump’s demands for interest rate cuts. Macklem, who previously voiced support for Powell amid mounting pressure from the Trump administration in September, reiterated his backing for Powell in a statement on Monday, praising him for exemplifying top-notch public service.
Macklem emphasized Powell’s commendable leadership in making evidence-based monetary policy decisions rather than succumbing to political pressures. Both the Bank of Canada and the U.S. Federal Reserve function autonomously from the government and aim to maintain annual inflation at two percent. The Fed also has a mandate to enhance maximum employment within the U.S. economy.
Trump has criticized Powell for his perceived slow pace in reducing interest rates. Macklem underscored the significance of central bank independence in ensuring price stability and enabling policymakers to make tough decisions that benefit the economy without interference from short-term political motives.
A bipartisan group of former Fed chairs and prominent economists drew parallels on Monday between the Trump administration’s actions and tactics typically seen in developing nations. Market expectations on Monday did not anticipate interest rate cuts from either the Bank of Canada or the U.S. Fed in their upcoming decisions at the end of January, according to LSEG Data & Analytics.
Some analysts suggested that the market’s subdued reaction reflects the belief that Powell could effectively refute claims that his description of the Fed’s $2.5 billion project to lawmakers constituted criminal behavior. Trump has a history of leveraging investigations, potentially without leading to actual indictments, to target his political adversaries, which include Fed governor Lisa Cook, New York Attorney General Letitia James, and former FBI director James Comey.
White House press secretary Karoline Leavitt clarified that Trump did not direct the Justice Department to probe Powell. Leavitt stated Trump’s dissatisfaction with Powell’s performance but left the determination of Powell’s criminality to the Department of Justice.