Following Federal Reserve Chair Jerome Powell's revelation that the Trump administration attempted to pressure the central bank through a grand jury investigation, Bank of Canada Governor Tiff Macklem has offered his firm support. "I reiterate my full support for Federal Reserve Chair Jerome Powell, who exemplifies the highest standards of public service," Macklem stated in an email declaration on Monday. "Chair Powell has performed admirably under complex and challenging circumstances, consistently leading the Fed to make monetary policy decisions based on evidence, not political considerations."
It is understood that Powell issued an extraordinary video statement on Sunday, disclosing that the U.S. Justice Department had served a subpoena to the Fed, threatening criminal prosecution. Powell indicated that while the investigation is ostensibly related to his congressional testimony regarding the renovation of the Fed's headquarters, it is substantively a tool of "ongoing pressure and threats" from the Trump administration. U.S. President Donald Trump has consistently demanded rapid interest rate cuts from the Fed and has repeatedly leveled sharp criticism at Powell and other Fed officials.
This statement represents Macklem's most explicit show of support for Powell to date. Previously, the Bank of Canada Governor had criticized Trump's attacks on Powell, stating that central bank independence is "sacrosanct." Macklem reiterated this stance in Monday's declaration, emphasizing that independence is "critical to the success of monetary policy," and that central banks with operational independence often achieve better results in curbing inflation.
He stated, "Independence grants central bank officials the space to make difficult decisions that benefit economic development and public interest, free from short-term political interference." Former U.S. Fed Chairs and former Treasury Secretaries also criticized the investigation on Monday, arguing that it would undermine the Fed's ability to formulate monetary policy based on economic data.
Avery Shenfeld, Chief Economist at Canadian Imperial Bank of Commerce, commented via email, "Economists are almost unanimous in believing that central bank independence is of paramount importance for financial and economic stability." "If this matter continues to escalate, it is believed that leading economists in the U.S. and other regions globally will voice similar support."
Jimmy Jean, Chief Economist at Desjardins Group, analyzed that Macklem's move might be aimed at defending the authority of major central banks in response to growing public skepticism towards them amid the current global wave of populism. "In my view, this is a particular response to Powell's rare statement yesterday. The signal it sends is very clear: if the Fed comes under attack, all central banks globally face a threat. This is perhaps also an effort—to maintain the credibility of the central banking system and reverse the negative perceptions some anti-establishment groups hold towards central banks."
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