By David Ljunggren and Promit Mukherjee
OTTAWA, Jan 28 (Reuters) – The threat to the independence of the U.S. Federal Reserve is increasing economic uncertainty around the world, Bank of Canada Governor Tiff Macklem said on Wednesday, in her strongest comments yet on the Federal Reserve’s outlook.
US President Donald Trump has repeatedly criticized Federal Reserve Chairman Jerome Powell, demanding that he lower interest rates. They aim to oust Federal Reserve Governor Lisa Cook, while the Justice Department has threatened Powell with criminal charges.
Macklem made his comments to reporters after leaving rates unchanged amid what he called “unusually high levels of uncertainty.”
“I think the threat to the independence of the U.S. central bank is something that has sort of been contributing to this sense of uncertainty,” he said.
“The Federal Reserve is the largest and most important central bank in the world, and we all need it to function well. A loss of Fed independence would affect us all,” he added, saying Canada would be particularly affected given its close economic ties to the United States.
Macklem was one of the central bank chiefs who earlier this month issued a joint statement backing Powell. Last September, Macklem said Trump’s attempts to pressure the Federal Reserve were starting to affect markets.
Keeping central banks independent allows them to make “difficult decisions” that benefit citizens, Macklem said.
“He’s doing a good job of leading the Federal Reserve based on evidence, based on facts… I hope he continues that way. That will be important for everyone,” he said.
Bank of Canada Senior Deputy Governor Carolyn Rogers said a strong Federal Reserve benefited virtually every economy in the world by keeping markets and inflation stable.
“Those things contribute to predictability and lower volatility in rates…there are many reasons to have a strong, independent Federal Reserve,” he said at the news conference.
(Reporting by David Ljunggren. Editing by Jane Merriman)