Chicago Federal Reserve president Austan Goolsbee on Friday expressed support for Jerome Powell and central bank independence when asked about pressure being applied by President Trump, saying the Fed chair is a “totally honorable guy.”
“I as well as a virtual unanimity of economists believe that central bank independence from political interference is absolutely critical to the operation of the Fed and of the economy,” Goolsbee said in an interview with Yahoo Finance.
“If you just look at places where they do not have independence for the central bank inflation is higher, growth is worse, unemployment and the job market do worse, and everyone knows that.”
He added that “it pains me to hear people actively discussing whether the central bank should be independent. There’s nothing good can come of discussion like that.”
His response follows an intense period of pressure from Trump and other White House officials frustrated with Powell’s wait-and-see approach to interest rates and his cautionary comments on the possibility of persistent inflation from Trump’s tariffs.
Trump’s allies in recent weeks used another tactic to turn up the pressure on Powell: They invoked a $2.5 billion renovation of the Fed’s headquarters as a way to question the chair’s management of the institution and whether he told Congress the truth about the project.
This past week Trump denied that he was planning to fire Powell imminently, but also left the door open to that possibility.
Goolsbee said he is a “big admirer” of Powell and considers him a “totally honorable guy” as well as a “first ballot hall of famer” without addressing any of specific criticism coming from the White House.
Goolsbee on Friday also echoed Powell’s caution on cutting interest rates, saying that “we don’t know until we know” how inflation will be affected by the “drip drip” of tariff announcements. Powell has been arguing that more time is needed to know if any of Trump’s tariffs push inflation higher this summer.
Goolsbee said he is seeing tariffs push up prices on goods, but not spilling over into prices for services, saying that still keeps him in a “wait and see” mode.
A rolling, staggered implementation of tariffs, he noted, makes it more difficult to argue the impact of tariffs will be just be a one-time increase in prices.
“Anything that makes it harder to figure out if we are on a path back to 2% inflation is extending the timetable of when the rate cuts can happen,” said Goolsbee.
He declined to say whether he sees rate cuts in the fall months of this year, noting that if there are multiple more months of benign readings on inflation he would feel more comfortable cutting.
But if he started to see a ramp up in prices with higher tariff rates, then he said he would have to assess the impact.
“Rates can come down, but we don’t know if we’re on the path to 2% inflation because we don’t know on tariffs on energy prices and geopolitics,” said Goolsbee. “We’re going to have to wait and see what what’s happening in the data.”
Fed governor Christopher Waller said Thursday he believes the central bank should cut rates at the next policy meeting on July 29-20, as he again argued that any inflation from tariffs would be temporary, underscoring a divide within the central bank.
He also hinted he may dissent at the July meeting if his colleagues decide to hold rates steady, which is what investors expect will happen. Odds priced in by traders for a rate cut in September only sit at nearly 60%.
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