Chicago Federal Reserve President Austan Goolsbee.
Kate Rooney | CNBC
Federal Reserve Bank of Chicago President Austan Goolsbee urged Monday to reduce the independence of the Central Bank, while President Donald Trump has strengthened criticism of chairman Jerome Powell.
“The long-term expectations that the FED would get inflation back to the goal of 2% was of crucial importance. FED independence is crucial for that,” said Goolsbee on “Squawk Box” of CNBC.
“If there is interference in the long term, this will mean higher inflation, it will mean poorer growth and higher unemployment, because there will simply be a little less willingness to perform and do the difficult things when the moment is difficult,” he said, refusing to comment directly on what Trump said.
Trump lobed another salvo in Powell on Friday for not lowering the interest rates. There have also been conversations that Trump may try to attract strings on monetary policy, both by legislation and possible by installing a “shadow chair” who could undermine the Powell authority.
“If we had a FED chairman who understood what he did, interest rates would also fall,” Trump said, pointing to examples of falling prices. “He should bring them [interest rates] down. “
Kevin Hassett, Economic Adviser to the White House, said on Friday that Trump and his team will assess whether they can remove the FED chair. Powell has said earlier that he cannot be dismissed under the law and is planning to serve as chairman in May 2026 until the end of his term of office.
“I have been to the Fed for a little more than two years. Before I was ever at the Fed, I would tell you, economists are unanimous that Fed Independence is crucial,” said Goolsbee. “And to see why, just look at the countries where they have not fed independence. Inflation is higher, unemployment is higher, growth is worse.”
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