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Chicago Federal Reserve President Austan Goolsbee recently expressed the importance of maintaining the independence of the Federal Reserve amid increasing criticism from former President Donald Trump directed at Chair Jerome Powell. Speaking on CNBC’s “Squawk Box,” Goolsbee emphasized the long-term value of keeping the Fed free from external influences, particularly when it comes to managing inflation.
“It’s crucial that we uphold the Fed’s independence in order to effectively manage inflation back down to our target of 2%,” Goolsbee stated. He indicated that any form of intervention could lead to adverse economic consequences, including higher inflation rates, subpar growth, and increased unemployment. He refrained from making direct comments regarding Trump’s criticisms but highlighted the risks associated with undermining the central bank’s authority.
Trump has recently intensified his attacks on Powell, suggesting that the current interest rates are unjustifiably high. “If we had a Fed Chairman that understood what he was doing, interest rates would be coming down,” he remarked, alluding to falling prices as a rationale for lowering rates. There are speculations that Trump might seek to influence monetary policy, potentially through legislative measures or by appointing a “shadow chair” to weaken Powell’s position.
On Friday, White House economic advisor Kevin Hassett noted that Trump is contemplating the possibility of removing the Fed chair. Powell has stated that, under existing laws, he cannot be dismissed and plans to finish his term, which is set to conclude in May 2026.
Goolsbee brought his experience at the Fed into the conversation, stating, “Economists generally agree on the critical nature of Fed independence. A glance at countries lacking this independence reveals troubling patterns: higher inflation, greater unemployment, and weaker economic growth.” His comments reinforce the consensus among many economists regarding the necessity of an autonomous central bank to ensure stable and effective monetary policy.
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