Chicago Federal Reserve President Austan Goolsbee issued a warning that any actions undermining the independence of the central bank could lead to a resurgence of inflation, directly addressing the criminal investigation by the U.S. Department of Justice into Federal Reserve Chairman Jerome Powell.
1. Goolsbee's Warning: Loss of Independence Could Lead to Inflation Resurgence
● Chicago Federal Reserve Bank President Austan Goolsbee warned on Thursday about recent attacks on the Federal Reserve and Chairman Powell, stating that such actions could negatively impact inflation.
● Goolsbee stated: “Any act that infringes upon or undermines the independence of the Federal Reserve will have dire consequences. Once there is an attempt to strip the central bank of its independence, inflation will rebound strongly.”
● Just days before this statement, Federal Reserve Chairman Powell confirmed that the U.S. Department of Justice had issued a subpoena to the Federal Reserve and threatened to bring criminal charges regarding his testimony about the renovation of the Federal Reserve building. Powell called this move an “excuse,” emphasizing that the government aims to exert more pressure on him regarding interest rate cuts.
2. Judicial Investigation Originates from Renovation Project Cost Dispute
● This criminal investigation stems from the multi-billion dollar renovation project at the Federal Reserve's Washington headquarters. The project, which began in 2022, had a budget of approximately $2.5 billion but has reportedly exceeded costs by about $1.5 billion.
● Former President Trump has publicly criticized the management issues surrounding this renovation project, accusing Powell of “serious dereliction of duty.” Trump has also openly considered suing Powell over the skyrocketing costs of the Federal Reserve headquarters renovation.
● The U.S. Attorney's Office for the District of Columbia has launched an investigation into the renovation project at the Federal Reserve's Washington headquarters and whether Powell committed perjury regarding the project before Congress.
3. Support for Powell's "Political Excuse" Claim
● Although Goolsbee stated he would not directly comment on the legal issues, he expressed support for Powell's statement made on Sunday. Powell pointed out that the investigation into the infrastructure project could be an excuse sought by Trump to achieve personal goals regarding interest rate policy.
● Goolsbee said: “I agree with his viewpoint. If the investigation is merely a pretext for intervention due to disagreements over interest rate decisions, it would undoubtedly be a disaster. We should never find ourselves in such a situation.”
● Goolsbee emphasized that the independence of the Federal Reserve is key to achieving its policy goals. He compared the U.S. to countries that have experienced similar central bank investigations, stating: “I know that some countries have undergone criminal investigations of their central banks, but those countries are Zimbabwe, Turkey, and some places you wouldn’t classify as developed economies.”
4. Trump Continues to Criticize Powell's Interest Rate Policy
● Trump has consistently launched sharp and often personal attacks on Powell's leadership of the Federal Reserve. Despite the Federal Reserve having cut the benchmark interest rate three times since September 2025, Trump continues to call for further significant rate cuts, even nicknaming Powell “Mr. Too Late.”
● In August 2025, Trump posted on his social media platform “Truth Social,” accusing Powell of severely damaging the U.S. housing industry by maintaining high interest rate policies. Trump claimed there were “no signs of inflation” at the time and that “all signals pointed to a significant rate cut,” bluntly stating that Powell was “a disaster.”
● Trump has also publicly considered appointing a new Federal Reserve chairman ahead of schedule, listing 11 candidates. However, he also stated that the likelihood of firing the Federal Reserve chairman is “very low,” although he does not rule out any possibilities.
5. Goolsbee's Professional Connection with Powell
Goolsbee and Powell do not completely align on Federal Reserve policy positions, but they share a common stance on maintaining the independence of the central bank.
● At the December 2025 meeting, Goolsbee voted to not cut interest rates, while the Federal Reserve ultimately decided to cut rates by 25 basis points.
● Before becoming the president of the Chicago Fed in December 2022, Goolsbee had a long history of involvement in Democratic politics. He served as the chair of the White House Council of Economic Advisers during former President Obama's administration and was an advisor during Biden's 2020 campaign.
● Goolsbee stated on Thursday that once “you swear in as a member of the Federal Reserve, you exit electoral affairs.” He praised Powell as a “first-ballot Hall of Famer,” acknowledging the Federal Reserve chairman's ability to lower inflation without triggering an economic recession.
6. Internal Policy Divisions at the Federal Reserve
Currently, there are significant divisions within the Federal Reserve regarding monetary policy, reportedly reaching a ten-year high.
● At the June 2025 meeting, Federal Reserve officials exhibited a highly polarized distribution of interest rate forecasts, with the gap between the most common and second most common predictions reaching 50 basis points, the highest level in the past decade.
● In the December 2025 interest rate decision, although the Federal Reserve cut rates by 25 basis points, three voting members of the Federal Open Market Committee cast dissenting votes. Goolsbee and Kansas City Fed President Esther George voted to not cut rates, while acting governor Michelle Bowman advocated for a substantial cut of 50 basis points.
● This division stems from differing interpretations among officials regarding the fundamentals of the U.S. economy, particularly regarding the fundamental disagreement on how to balance inflation control with economic growth.
7. Future Monetary Policy Outlook
● Regarding monetary policy, Goolsbee pointed out that given the ample signs of a stable job market, the central bank should focus on reducing inflation, maintaining expectations for potential rate cuts later this year.
● He stated: “The job market remains very strong, and I believe the most important issue we face is that we must bring inflation back down to 2%. There is still significant room for rate cuts, and cuts could happen this year, but we must have compelling evidence that inflation is returning to the 2% trajectory.”
● JPMorgan believes there is still room for further rate cuts in 2026, especially if the job market underperforms relative to the Federal Reserve's forecasts. Additionally, the new Federal Reserve chairman is expected to take office in May 2026, which could also bring a dovish tendency to the committee.
Goolsbee's credentials in the financial sector extend beyond the Federal Reserve; he served as the chair of the White House Council of Economic Advisers during the Obama administration. The warning from the Chicago Fed president not only defends Powell but also protects the cornerstone of the modern financial system.
When asked about his views on interest rate policy, Goolsbee stated that “the job market remains very strong” and emphasized the need to bring inflation back to the 2% target. This statement suggests that despite facing political pressure, the core decision-making of the Federal Reserve will still revolve around economic data.
Join our community to discuss and grow stronger together!
Official Telegram community: https://t.me/aicoincn
AiCoin Chinese Twitter: https://x.com/AiCoinzh
OKX benefits group: https://aicoin.com/link/chat?cid=l61eM4owQ
Binance benefits group: https://aicoin.com/link/chat?cid=ynr7d1P6Z
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
