Fed's Goolsbee Warns of Inflation Spike Amid Political Heat

Chicago Fed President Austan Goolsbee delivered a stark warning on Thursday, stating that any attempt to weaken the Federal Reserve's independence could unleash a new wave of inflation.

"Anything that's infringing or attacking the independence of the central bank is a mess," Goolsbee said. "You're going to get inflation come roaring back if you try to take away the independence of the central bank."

Goolsbee's comments come as Fed Chair Jerome Powell confirms he has been served a subpoena by the Justice Department. The investigation relates to a major renovation of the Federal Reserve's headquarters in Washington, D.C.

Political Pressure Intensifies on Fed Leadership

The Chicago Fed president supported Powell’s recent assertion that the investigation could be a pretext for Donald Trump to exert influence over interest rate policy.

Trump has consistently criticized Powell, using insults and publicly demanding lower rates. This pressure has continued even though the Fed has already cut its main interest rate three times since September 2025. Trump has nicknamed the Fed chair "Too Late," signaling his dissatisfaction with the pace of monetary easing.

While Powell's term as chair is set to end in May, he is eligible to remain a Fed governor until 2028.

The Global Precedent for Central Bank Independence

Goolsbee, who joined the Chicago Fed in December 2022, directly addressed the unusual nature of a government investigation into its own central bank. He argued that such actions are not characteristic of stable, advanced economies.

"I know that there have been countries that had criminal investigations of their central banks," he noted. "But those countries are Zimbabwe and Russia and Turkey and a bunch of places that you would not characterize as advanced economies."

The underlying principle is that when a central bank loses its political independence, its credibility erodes. Historically, a loss of central bank credibility is often followed by a rise in inflation as the public loses faith in the institution's commitment to price stability.

A Defense of Powell's Record

Goolsbee, who previously served as an advisor to Barack Obama and Joe Biden, emphasized that his political past is irrelevant to his current role. "Once you've become a sworn member of the Federal Reserve, you're out of the elections business," he stated.

He also offered a strong endorsement of Powell's performance, calling him a "first-ballot Hall of Famer" for successfully bringing down inflation without triggering a recession. Goolsbee's comments frame the current conflict not just as a political dispute, but as a fundamental threat to the economic stability Powell has worked to achieve.