Bank of Canada's Macklem: provincial premiers risk undermining bank's independence

(Reuters) - Bank of Canada (BoC) Governor Tiff Macklem told provincial premiers who publicly called on the central bank not to raise interest rates last month that their requests could undermine the institution's independence, the central bank said.

The elected leaders of Ontario, British Columbia, and Newfoundland and Labrador, expressed concerns about the impact of rising rates and asked the central bank to refrain from raising its benchmark rate further, according to letters sent to Macklem before BoC's rate decision on Sept. 6.

In September, the bank left rates on hold but warned they still could go higher.

On Sept. 13, Macklem responded to each premier saying that instructions or requests from elected officials "could create the impression that the Bank of Canada's operational independence is at risk," according to copies of the letters shared by the central bank on Tuesday, confirming an earlier Canadian Press report.

"Operational independence is critical to the legitimacy of the central bank, and to the effectiveness of monetary policy as a means to achieve price stability," Macklem wrote.

The BoC is scheduled to announce its decision on its benchmark rate on Wednesday and analysts expect the central bank to keep the rate on hold as the economy slows.

Despite Macklem's response, Ontario Premier Doug Ford wrote another letter to Macklem, which was posted on social media platform X on Sunday, repeating his call for no further interest rate hikes.

"There is simply no excuse for increasing the already crushing pressure previous interest rate hikes have placed on so many families and businesses," Ford said.

Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland both have commented this year on the interest rate levels, though never going as far as to recommend policy. On Wednesday, Freeland reiterated the government's position on the BoC's independence.

"Our government has been very, very clear that we respect the institutional independence of the Bank of Canada and we will continue to do so," she told reporters.

(Reporting by Anirudh Saligrama in Bengaluru and Steve Scherer in Ottawa; Editing by Sharon Singleton, Chizu Nomiyama and Andrea Ricci)