Bank of Canada Governor Tiff Macklem defended Federal Reserve Chair Jerome Powell against allegations made by U.S. President Donald Trump’s Justice Department. Powell revealed that the DOJ had issued a subpoena to the Fed regarding his testimony to the Senate in June about a renovation project at the Federal Reserve buildings in Washington, D.C.
Powell suggested that the potential criminal charges were a result of independent monetary policymakers in the U.S. resisting pressure to lower interest rates as desired by President Trump. Macklem, who had previously supported Powell amid mounting pressure from the Trump administration, reiterated his backing for the Fed chair, emphasizing Powell’s commitment to evidence-based monetary policy decisions over political influence.
Both the Bank of Canada and the U.S. Federal Reserve operate autonomously from government oversight, with the goal of maintaining annual inflation at two percent. Trump has criticized Powell for not implementing interest rate cuts swiftly.
Macklem underscored the importance of central bank independence in ensuring price stability and enabling policymakers to make decisions that benefit the economy without interference from short-term political agendas. A bipartisan group of former Fed chairs and leading economists likened the Trump administration’s actions to those seen in developing nations.
Market expectations on Monday did not anticipate interest rate cuts by either the Bank of Canada or the U.S. Federal Reserve in their upcoming decisions at the end of January. Analysts noted that Powell’s ability to counter the allegations regarding his Senate testimony on the Fed’s $2.5 billion project could explain the subdued market response.
President Trump has a history of leveraging investigations to target his political adversaries, with Fed governor Lisa Cook, New York Attorney General Letitia James, and former FBI director James Comey among those subjected to scrutiny. The White House denied direct involvement by Trump in the Justice Department’s probe of Powell, with press secretary Karoline Leavitt stating that the determination of Powell’s alleged criminality rests with the DOJ.