By David Ljunggren and Promit Mukherjee
OTTAWA, Jan 28 (Reuters) – The threat to the independence of the U.S. Federal Reserve is boosting economic uncertainty around the world, Bank of Canada Governor Tiff Macklem said on Wednesday in his strongest comments to date on the outlook for the Fed.
U.S. President Donald Trump has repeatedly criticized Fed Chairman Jerome Powell, demanding he cut interest rates. He is seeking to remove Fed governor Lisa Cook while the Department of Justice has threatened Powell with a criminal indictment.
Macklem made his remarks to reporters after keeping rates on hold amid what he called unusually high levels of uncertainty.
“I think the threat to the independence of the central bank in the United States is one thing that has sort of been contributing to this sense of uncertainty,” he said.
“The Federal Reserve is the biggest, most important central bank in the world, and we all need it to work well. A loss of independence of the Fed would affect us all,” he added, saying Canada would be particularly affected given its close economic links to the United States.
Macklem was one of the central bank heads who earlier this month issued a joint statement backing Powell. Last September, Macklem said Trump’s attempts to pressure the Fed were starting to hit markets.
Keeping central banks independent lets them take “difficult decisions” that benefit citizens, Macklem said.
“He is doing a good job at leading the Fed based on evidence, based on facts … I hope it stays that way. That’s going to be important for everyone,” he said.
Bank of Canada senior deputy governor Carolyn Rogers said a strong Fed benefited virtually every economy in the world because it kept markets and inflation stable.
“Those things contribute to predictability and less sort of volatility in rates … there are a lot of reasons for having a strong, independent Fed,” she told the press conference.
(Reporting by David Ljunggren. Editing by Jane Merriman)