Federal Reserve Bank of Chicago President Austan Goolsbee on Monday urged against reducing the central bank’s independence as President Donald Trump amped up criticism of Chair Jerome Powell.
Goolsbee: Independence Key to Fighting Inflation
Federal Reserve Bank of Chicago President Austan Goolsbee on Monday underlined the critical importance of maintaining the Fed’s independence, particularly as it continues efforts to lower inflation to its 2% target.
Speaking on CNBC’s Squawk Box, Goolsbee stated, “Long-run expectations that the Fed would get inflation back down to the 2% target were critically important. Fed independence is critically important for that.”
He cautioned that political interference would make it harder for the Fed to take necessary but potentially unpopular actions during challenging economic periods. “Over the long run, interference means higher inflation, worse growth, and higher unemployment,” Goolsbee warned.
While he declined to comment directly on Trump’s statements, Goolsbee emphasized that across the field of economics, there is strong consensus that central bank independence is essential. He pointed to countries without such autonomy, where inflation and joblessness tend to be significantly higher.
See more related articles: Bitcoin gains while stocks fall us dollar weakens
Trump Threatens Powell’s Position
Former President Trump intensified his criticism of Jerome Powell on Friday, saying that interest rates should already be lower and suggesting Powell does not understand his role.
“If we had a Fed Chairman that understood what he was doing, interest rates would be coming down,” Trump said, referencing falling prices in parts of the economy. “He should bring them down.”
The Trump team is reportedly exploring ways to influence Fed policy, including legislative action and possibly appointing a “shadow chair” to challenge Powell’s leadership. White House economic advisor Kevin Hassett even stated that the administration is assessing whether Powell could be removed from his position.
However, Powell has previously stated that he cannot be fired under current law and intends to complete his term, which runs through May 2026.
“Economists are basically unanimous that Fed independence is critically important,” Goolsbee said.
“Just look at countries where they don’t have it: inflation is higher, unemployment is higher, growth is worse.”
