Loss of independence of U.S. Fed would particularly affect Canada: BoC’s Macklem

The head of the Bank of Canada says the risk of a loss of independence at the U.S. Federal Reserve is also a threat to Canada.

Speaking Wednesday at a news conference after the latest rate decision, bank governor Tiff Macklem said the pressure the U.S. central bank has faced is contributing to wider uncertainty.

“The U.S. Federal Reserve is the biggest, most important central bank in the world, and we all need it to work well,” said Macklem.

“A loss of independence of the Fed would affect us all. And for Canada, our financial markets are particularly integrated with the United States, so it would particularly affect us.”

Macklem’s comments come as U.S. President Donald Trump has repeatedly criticized U.S. Fed chair Jerome Powell and the Fed for not moving faster to cut rates.

Trump dramatically escalated his confrontation with the Fed earlier this month with the Justice Department investigating and threatening criminal charges.

Powell, who had previously attempted to ignore Trump’s criticism, called the threat of charges “pretexts” in the president’s campaign to seize control of U.S. interest rate policy from the Fed’s technocrats.

Macklem was among the central bankers from around the world who signed a statement saying they “stand in full solidarity” with Powell, and emphasized that the independence of central banks is a cornerstone of price, financial and economic stability.

“It’s not independence for independence’s sake,” Macklem said Wednesday.

“It provides central banks with the space to take difficult decisions that benefit the economy, benefit the citizens of that country, over the medium term.”

Fed actions have impacts around the world due to the U.S. dollar’s role as the leading currency for trade transactions and central bank reserves. Fed interest rate changes can affect the dollar’s exchange rate against other currencies and the value of foreign investors′ U.S. assets.

Tony Stillo, director of Canada economics at Oxford Economics, said if U.S. Fed policy rates become politically motivated, it could lead to knock-on effects in Canada. 

“Let’s say they cut deeper than they should have in the U.S. Well, we have implications for our currency, which then has implications for imported inflation, implications for what the Bank of Canada should set its policy rate at,” said Stillo.

“So when things are set more in an appropriate manner, given a gauging of what’s appropriate in terms of monetary support, that is better for us to set an appropriate policy up here.”

The Fed left interest rates unchanged at its decision Wednesday afternoon.

When asked by reporters if he was confident the Fed can retain its independence, Powell said, “Yes,” and added, “I’m strongly committed to that and so are my colleagues.”

Macklem said that Powell is doing a good job of leading the Fed based on facts, evidence and the best economic judgments of the Federal Open Market Committee.

“I hope it stays that way,” he said.

“Keeping the Fed operating independently, it’s good for Americans, it’s good for Canadians.”

This report by The Canadian Press was first published Jan. 28, 2026.

–With files from The Associated Press.