Senior Fed official warns against curbing central bank independence

[WASHINGTON] Federal Reserve Bank of Chicago president Austan Goolsbee warned against efforts to curtail the US central bank’s independence, days after President Donald Trump expressed his displeasure with Fed chairman Jerome Powell.

“There’s virtual unanimity among economists that monetary independence from political interference – that the Fed or any central bank be able to do the job that it needs to do – is really important,” Goolsbee said on CBS’ Face the Nation on Sunday (Apr 20).

“I strongly hope that we do not move ourselves into an environment where monetary independence is in question,” he said. “That would undermine the credibility of the Fed.”

He said that in countries where central banks do not have monetary independence, “the fact is, the inflation rate is higher, growth is slower, the job market is worse”.

Last week, Trump was frustrated that the Fed had not moved to lower interest rates, unlike the European Central Bank, who posted on social media that Powell’s “termination cannot come fast enough!”

He has not clarified whether that means he intends to find a way to fire the Fed chief, or is simply eager for Powell’s term to end as scheduled in May 2026.

The legal basis of firing the chair of the Federal Reserve, which is structured to be independent from politics, is questionable. Trump’s comments signified once more the president’s push to have more control over all arms of the US government.

Trump and his team “will continue to study” whether Powell can be ousted, National Economic Council director Kevin Hassett said on Friday when asked by a reporter if removing him was an option.

Powell has said he will not retire before his term ends, and reiterated at the Economic Club of Chicago on Apr 16 that the central bank’s independence “is a matter of law”, and that “we are not removable except for cause”. BLOOMBERG