Chicago Fed President Austan Goolsby said Thursday that any effort to weaken the Fed’s independence would cause inflation to flare up again.
“Anything that violates or attacks central bank independence will lead to chaos,” Goolsby said. “If we try to take away central bank independence, inflation will return to full force.”
Mr. Goldsby’s warning, of course, came shortly after Fed Chairman Jerome Powell acknowledged that the Justice Department had served him with a subpoena in what he called an illegal case involving major renovations to the Fed’s headquarters in Washington, D.C.
The Chicago Fed president backed Powell’s recent comments that all of this could be an excuse for Donald Trump to influence interest rate policy.
Trump advances Powell as legal heat heats up
“I agree with his argument that if they’re using the investigation as an excuse because they don’t agree with the interest rate decisions, that’s outrageous,” Goldsby said. “We shouldn’t be there.”
Mr. Trump’s pressure on Mr. Powell has not yet subsided. He used derogatory language and demanded a significant reduction in interest rates. He also gave Powell the nickname “Too Late.”
During this time, the Fed has already cut its key interest rate three times since September 2025, but that wasn’t enough for President Trump. he wants more. And now he’s going after Mr. Powell with the full force of the federal government.
Powell’s term as Fed chair ends in May, but he could remain on the Fed board until 2028 if he wishes. However, the attacks are not limited to him. Goolsby said this is not normal in a country with a serious economy.
“We are aware that some countries have launched criminal investigations into central banks,” he said. “But many of these countries are not developed countries, such as Zimbabwe, Russia, and Türkiye.”
He’s not wrong. When central banks lose their independence, so too does their credibility. And when that runs out, inflation usually follows.
Goldsby has been involved in politics. Prior to joining the Chicago Fed in December 2022, he worked with Barack Obama and advised Joe Biden during the 2020 election campaign. But on Thursday, he said that doesn’t matter anymore. “Once you become a sworn member of the Federal Reserve Board, you are no longer involved in election work.”
He also didn’t hold back in praising Powell’s accomplishments, calling him a “first-ballot Hall of Famer” for keeping inflation in check without sending the country into recession.
