Jan 14 (Reuters) – The independence of the U.S. central bank is critical to containing inflation, and attacks against it, such as the Trump administration’s criminal probe into Federal Reserve Chair Jerome Powell, threaten to make that task harder, Chicago Fed President Austan Goolsbee said on Wednesday.
“The independence of the Fed couldn’t be more important for the long-run inflation rate in this country,” Goolsbee told National Public Radio. “Any place where you don’t have central bank independence, inflation comes roaring back.”
“We’ve spent the last five years fighting to get the inflation rate down – and that hasn’t been easy – and if you’re attacking the independence of the Fed, that makes that problem worse,” Goolsbee said.
Goolsbee’s comments follow moves over the weekend by the U.S. Justice Department to issue subpoenas to the Fed and Powell over comments he made last summer to the Senate regarding cost overruns at a $2.5 billion building renovation project at the central bank’s headquarters complex in Washington.
Powell, in a video statement on Sunday, called the unprecedented action a pretext and said the administration’s threats have emerged following President Donald Trump’s demands for sharply lower interest rates.
The administration’s maneuvers sparked global condemnation by other major central banks and led some Republican U.S. senators to threaten to hold up any nominee Trump puts forward as a successor to Powell – whose term as Fed leader expires in May – while any Justice Department investigation is underway.
“I consider Chair Powell to be a first-ballot hall-of-fame Fed chair,” Goolsbee said. “And if we’re going to get into a circumstance where the independence – or even the integrity – of Chair Powell is in question, we’re in a bad spot.”
(Reporting by Dan Burns; Editing by Paul Simao)
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