Powell Gets Support From Bank of Canada’s Macklem Amid Trump Attacks

Jerome Powell, chairman of the US Federal Reserve and Tiff Macklem, governor of the Bank of Canada, during the Jackson Hole Economic Policy Symposium in 2024. Photo by Natalie Behring /Photographer: Natalie Behring/Bl

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(Bloomberg) — Bank of Canada Governor Tiff Macklem offered support to Federal Reserve Chair Jerome Powell from US President Donald Trump’s attacks, as the Canadian policymaker called the independence of central banks “sacrosanct.” 

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“The record of independent central banks with clear mandates — in our case, an inflation target — has served Canadians very well and similarly in other countries. I don’t think you want to threaten the independence of the central bank,” Macklem said Thursday in response to a question about Trump’s pressure on Powell.

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Trump has repeatedly harangued Powell on social media, calling him a “major loser” and a “fool,” suggesting he should be cutting interest rates. He’s also threatened to fire the Fed chair, before backing off that threat and denying he ever considered dismissing Powell.

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Following the release of a report that warned a prolonged trade war threatens Canada’s financial stability, Macklem said the US tariffs will leave permanent impacts even if they are lifted. “Trust has been broken to some degree and we’re not going to get that all back right away,” he said. 

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“There are some things Canada should have been doing anyways,” he added. “We should have been developing broader markets than the US. We should have been strengthening our internal connectivity, internal trade, internal transportation.”

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It was important for newly elected Canadian Prime Minister Mark Carney and Trump to meet in Washington earlier this week, Macklem said. “It’s important that they understand each other’s positions and it’s important that the lines of communication were open. But there’s clearly a long way to go.”

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Macklem pointed to Trump’s trade policy U-turns, involving announcements of substantial tariffs followed by reversals. “What you have to take away from that is it’s pretty hard to predict,” he said. 

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The central bank held rates steady at 2.75% its last meeting in April, as members of the governing council opted to wait for more information as they weighed the volatile changes coming from the White House. 

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Still, Macklem acknowledged there had been “positive developments” in US trade policy, including Thursday’s announcement of a framework with the UK, since the central bank’s last meeting. The movement puts Canada on a path closer to the lower-tariff scenario of the two options outlined at that meeting, he said. 

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The remarks suggest Macklem is increasingly comfortable commenting on the US administration’s trade policies and actions. Later this month, he’ll meet with other Group of Seven central bankers and finance ministers in Banff, Alberta, where he’ll be among those with the longest tenures.

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Asked about the central bank’s own role in rising household indebtedness, given its low rates in the decade leading up to the post-pandemic inflation period, Macklem noted the vulnerabilities have been growing for a long time.

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“We’ve been expressing concern about rising household indebtedness for many years now. That’s happened against the background of low interest rates. It’s happened against the background of high interest rates,” he said. “It’s a broader issue than monetary policy.”

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—With assistance from Randy Thanthong-Knight and Catarina Saraiva.

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