Fed’s Goolsbee says inflation could come ‘roaring back’ if central bank independence goes away
Chicago Federal Reserve President Austan Goolsbee has raised concerns about the recent attacks on the central bank and Chair Jerome Powell, warning that they could have negative implications for inflation.
During an interview on CNBC’s “Squawk Box,” Goolsbee emphasized the importance of maintaining the independence of the central bank. He stated, “Anything that’s infringing or attacking the independence of the central bank is a mess. You’re going to get inflation come roaring back if you try to take away the independence of the central bank.”
The remarks come in the wake of reports that Powell has been subpoenaed by the Justice Department in connection with cost overruns on the Federal Reserve’s headquarters renovation project. The tensions between the Fed and the White House have escalated, with suggestions of potential criminal charges against Powell.
While Goolsbee refrained from commenting directly on the legal issues, he expressed support for Powell’s assertion that the investigation could be a pretext for influencing interest rate decisions. He stated, “If you’re investigating as a pretext because you disagree with the rate decisions, that’s a mess. We should not be in that place.”
President Donald Trump has been vocal in his criticism of the Powell Fed, advocating for lower interest rates and dubbing Powell “Too Late.” Despite the Fed’s rate cuts in recent years, Trump has continued to push for further reductions.
Powell’s term as chair is set to end in May, but he could potentially serve as a governor until 2028. Goolsbee, along with other Fed officials, emphasized the importance of the central bank’s independence in achieving its objectives.
Prior to his role at the Chicago Fed, Goolsbee had a background in Democratic politics, having served as the chair of the Council of Economic Advisers under President Obama and as an advisor during Joe Biden’s campaign. He clarified that once appointed to the Federal Reserve, he no longer participates in electoral activities.
Goolsbee commended Powell as a “first-ballot Hall of Famer” for his efforts in controlling inflation without triggering a recession. The Chicago Fed president stressed the significance of preserving the Fed’s independence, citing examples of countries like Zimbabwe, Russia, and Turkey where central bank investigations have led to instability.
In conclusion, Goolsbee’s remarks underscore the critical role of the Federal Reserve’s independence in maintaining economic stability and achieving its objectives. The ongoing scrutiny and challenges facing the central bank highlight the need for a robust and autonomous monetary policy framework.
