Prime Minister Mark Carney is offering his seal of approval on U.S. President Donald Trump's pick to lead the U.S. Federal Reserve.
Trump said earlier Friday he would nominate former Federal Reserve official Kevin Warsh to replace outgoing chair Jerome Powell when his term expires in the spring.
Carney said in a social media post that Warsh is "a fantastic choice to lead the world’s most important central bank at this crucial time."
Carney's tenure as governor of the Bank of Canada overlapped with Warsh's time on the U.S. Fed's board of governors from 2006 to 2011.
"I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump posted on social media Friday.
“On top of everything else, he is ‘central casting,’ and he will never let you down.”
Trump's nomination comes as the U.S. president has been ramping up his confrontations with Powell and the Fed.
Earlier this month, Powell said the U.S. Department of Justice has subpoenaed the Fed over his previous congressional testimony, which he called "pretexts" for pushing the central bank to lower interest rates.
Bank of Canada governor Tiff Macklem joined central bankers in Europe in voicing his support for Powell earlier this month.
Speaking to reporters after the Bank of Canada's rate decision Wednesday, Macklem said maintaining central bank independence south of the border is also important for financial stability in Canada, given the outsized role the U.S. Fed plays in the global economy.
The Canadian Press asked the Bank of Canada if Macklem's concerns about compromised central bank independence in the United States were assuaged by Warsh's nomination.
“I congratulate Kevin Warsh on his nomination as Chair of the Federal Reserve," he said in a statement.
"I worked with Kevin during his time as a Governor of the Federal Reserve and look forward to working with him again.“
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.
The appointment, which requires Senate confirmation, amounts to a return trip for Warsh, 55, who was the youngest governor in the U.S. Fed's history when he was appointed at age 35. He is currently a fellow at the right-leaning Hoover Institution and a lecturer at the Stanford Graduate School of Business.
In some ways, Warsh is an unlikely choice for the Republican president because he has long been a hawk in Fed parlance, or someone who typically supports higher interest rates to control inflation. Trump, by contrast, has said the Fed’s key rate should be as low as one per cent, a level few economists endorse, and far below its current level of about 3.6 per cent.
Macklem said Wednesday that history has shown a central bank that operates free of political influence does a better job delivering price, financial and economic stability.
"It's not independence for independence's sake," he said.
"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."
During his time as governor, Warsh objected to some of the low-interest rate policies that the Fed pursued during and after the 2008-09 Great Recession. He also often expressed concern at that time that inflation would soon accelerate, even though it remained at rock-bottom levels for many years after that recession ended.
More recently, however, in speeches and opinion columns, Warsh has voiced support for lower rates.
Picture Courtesy: AP Photo/Reed Saxon
