Fed Independence Under Fire: Austan Goolsbee Warns Political Attacks Could Trigger Inflation Comeback
Central bank autonomy isn't just a policy wonk's talking point—it's the last line of defense against runaway prices. Attack it, and inflation comes roaring back. Fast.
The Fed's Delicate Dance
Monetary policy works on credibility. Markets believe the Fed will act, so they act first—long-term rates adjust before a single rate hike hits the tape. Undermine that belief, and the whole mechanism breaks down. You're left with a central bank playing catch-up to a market that no longer trusts it.
Political Pressure vs. Price Stability
It's the oldest conflict in finance: short-term political gain versus long-term economic stability. Politicians want low rates before an election; the Fed's job is to ignore that noise. When the line blurs, inflation expectations become unanchored. Suddenly, everyone's pricing in future money printing—and those expectations become self-fulfilling.
The Crypto Angle: Digital Gold in a Fiat Storm
Here's where it gets interesting for our space. A politicized Fed chasing its tail on inflation? That's a tailor-made narrative for hard-cap assets. Bitcoin doesn't care about midterm elections or approval ratings. Its monetary policy is written in code, not debated in congressional hearings. When trust in institutions erodes, alternatives gain appeal—sometimes even the ones Wall Street still calls a 'fad.'
The Bottom Line
Goolsbee's warning is stark because the stakes are real. Independent central banking is boring, technical, and utterly essential. Turn it into a political football, and you get 1970s-style stagflation—high prices, stagnant growth, and a whole generation learning what 'misery index' really means. The cure for that headache is far more painful than preventative policy ever was. Just ask any trader who's tried to time the market—sometimes the best move is not to make a desperate one at all.
Trump pushes Powell while legal heat builds
“I agree with it, with his argument that if you’re investigating as a pretext because you disagree with the rate decisions, that’s a mess,” Goolsbee said. “We should not be in that place.”
Trump’s pressure on Powell hasn’t let up. He’s slammed him with insults and called for much lower rates. He even gave Powell a nickname: “Too Late.”
All this while the Fed has already cut its main interest rate three times since September 2025. But that hasn’t been enough for Trump. He wants more. And now he’s going after Powell with the full weight of the federal government.
Powell’s time as chair ends in May, but he can stick around as a Fed governor until 2028 if he wants. Still, the attacks aren’t just about him. Goolsbee said this kind of thing isn’t normal in serious economies.
“I know that there have been countries that had criminal investigations of their central banks,” he said. “But those countries are Zimbabwe and Russia and Turkey and a bunch of places that you WOULD not characterize as advanced economies.”
He’s not wrong. Once a central bank loses its independence, credibility goes with it. And once that’s gone, inflation usually follows.
Goolsbee has been around politics. Before joining the Chicago Fed in December 2022, he worked with Barack Obama and advised Joe Biden during his 2020 campaign. But on Thursday, he said none of that matters anymore. “Once you’ve become a sworn member of the Federal Reserve, you’re out of the elections business.”
He also didn’t hold back on praising Powell’s past work, calling him a “first-ballot Hall of Famer” for cutting down inflation without pushing the country into a recession.
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