Chicago Fed Chief Warns Against Political Interference in Central Bank Decisions

A top Federal Reserve official, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, spoke out on April 20, defending the independence of the central bank amid growing political pressure from President Donald Trump.

Goolsbee's comments came in response to Trump's repeated criticism of Fed Chair Jerome Powell, including a recent social media post in which Trump stated, "Powell's termination cannot come fast enough."

In an interview on CBS's "Face the Nation," Goolsbee emphasized the importance of maintaining the Federal Reserve's autonomy, saying, "I strongly hope that we do not move ourselves into an environment where monetary independence is questioned."

He added that undermining the Fed's independence would damage its credibility, which is crucial for its role in stabilizing the US economy.

Trump has been vocal in his discontent with Powell and the Federal Reserve's monetary policies.

The president has consistently pushed for the central bank to lower interest rates in hopes of stimulating the economy, particularly as his trade policies and tariff disputes continue to disrupt financial markets.

Powell, however, has taken a more cautious approach, citing concerns about inflation and market uncertainty, which has led to a clash between the two leaders.

The Federal Reserve is designed to operate independently of political influence, a principle that Goolsbee strongly supports, Bloomberg said.

"There's virtual unanimity among economists that monetary independence from political interference is really important," he said.

The Fed's role is to promote stable prices and full employment, goals that can sometimes conflict with political desires, especially during times of economic turbulence.

Trump Doubles Down on Calls for Fed Chair Powell's Removal

Trump's frustrations with Powell escalated on April 16, when the Fed chair signaled that the central bank would not rush to lower interest rates, stating, "We are well-positioned to wait for greater clarity before considering any adjustments to our policy stance."

According to USA Today, this prompted Trump to take to social media, once again calling for Powell's removal. On April 17, at a White House event, Trump went further, stating, "I'm not happy with him... If I want him out, he'll be out of there real fast, believe me."

However, the legal question of whether Trump can remove Powell from his post is complex. The Federal Reserve is designed to operate independently from political pressures, and Powell has made it clear that his position is protected by law.

"Our independence is a matter of law," Powell stated, stressing that Fed officials can only be removed "for cause."

While Trump appointed Powell in 2018, his recent comments have raised concerns about political interference in the Fed's decision-making process.

Goolsbee echoed these concerns, noting that in countries where central banks lack independence, inflation tends to be higher, economic growth slower, and unemployment worse.

The debate over the Fed's independence is not only a matter of economic policy but also of broader implications for US governance.

Goolsbee warned that any move to politicize the central bank could have long-lasting negative effects on the economy and the credibility of US institutions.

Originally published on vcpost.com