Central bank leaders around the globe, including on the Bank of Canada, are voicing their support for U.S. Federal Reserve chair Jerome Powell after he said that the U.S. Department of Justice is launching a criminal investigation into him.
Powell said in a video statement released on Sunday that he believes the Trump administration was using the DOJ to achieve control over the Fed with the intention to influence rates of interest in the US.
The European Central Bank released a written statement on Tuesday standing in solidarity with the Fed and Powell. It was penned by the president of the ECB and co-signed by the leaders of other central banks, including governor Tiff Macklem on the Bank of Canada.
The letter underscores the way it’s “critical to preserve” the independence of central banks.
U.S. President Donald Trump has been vocal prior to now that he wants Powell and the U.S. Fed to be more aggressive in cutting rates of interest, and even suggested he might fire Powell in the summertime of 2025.
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The Fed cut rates of interest in December 2025 for the third straight meeting, but Powell said it might hold rates for the following several months.
Trump’s threats have raised fears of political interference within the U.S. Fed, which is alleged to be independent from politicians with the intention to prevent partisan manipulations of the economy.
What are the risks of interference on the Fed?
Central banks just like the U.S. Fed have a mandate to support their national economies by adjusting monetary policy with the intention to ensure borrowing rates are low enough to permit businesses and consumers to afford loans easily while keeping prices for goods and services stable.
They make these decisions independently using data and expert evaluation, and strictly without political influence. The incontrovertible fact that those decisions are made without political control forms the inspiration of worldwide investor confidence and trust within the American economy and the U.S. dollar as a reserve currency.
Without the arrogance that economic decisions are being made based on independent data and evidence, that trust — which allows investors and businesses to spend money — could evaporate.
“The independence of central banks is a cornerstone of price, financial and economic stability within the interest of the residents that we serve,” the central bankers said within the joint statement.
“It’s due to this fact critical to preserve that independence, with full respect for the rule of law and democratic accountability.”
A report from the International Monetary Fund that checked out dozens of central banks from 2007 to 2021 showed that “those with strong independence scores were more successful in keeping people’s inflation expectations in check, which helps keep inflation low.”
“Independence is critical,” the IMF noted in 2024.
The Bank of Canada has also been faced with political pressure prior to now, with Macklem responding to letters sent by several provincial leaders in Canada in 2023 pressuring the bank to chop rates of interest.
“While I’m more than happy to get your perspectives on the impact of our policy decisions, instructions or requests from elected officials about how we must always set rates of interest could create the impression that the Bank of Canada’s operational independence is in danger. I’m sure you agree that this might be unlucky,” Macklem wrote in his responses to every of the premiers in 2023.
“Operational independence is critical to the legitimacy of the central bank, and to the effectiveness of monetary policy as a way to attain price stability.”
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