Chicago Federal Reserve President Austan Goolsbee has emphasized that controlling inflation remains the U.S. central bank's primary objective, stating that getting inflation back to the 2% target is "the most important thing facing us." His comments come amid ongoing tensions between the Federal Reserve and the White House over monetary policy direction.

Inflation Target Takes Priority

Speaking in a CNBC interview, Goolsbee indicated that while "rates can go down still a fair amount" with potential cuts even happening this year, any policy changes require "convincing evidence that we're on path back to 2% inflation." The Chicago Fed president, who dissented against the December rate cut, expressed confidence in labor market stability based on recent unemployment insurance claims data.

Fed Independence Under Pressure

Goolsbee strongly defended Federal Reserve independence amid escalating tensions with the Trump administration. President Trump has repeatedly pressured the Fed to deliver large rate cuts, while a Justice Department investigation into the central bank's headquarters renovation has raised concerns about political interference.

"To try to blow up Fed independence is kind of a festering stink bug in the middle of that road back to 2%," Goolsbee warned. He drew comparisons to countries that have faced similar pressures, stating: "I know that there have been countries that had criminal investigations of their central banks, but those countries are Zimbabwe and Russia and Turkey and a bunch of places that you would not characterize as advanced economies."

Global Support for Fed Leadership

The concerns over Fed independence have prompted rare public support from international central banking leaders. Senior monetary policymakers from Europe, North America, and Asia have made unified statements supporting Fed Chair Jerome Powell, representing an unusual departure from central banks' typical reluctance to comment on domestic political matters.

Economic Policy Implications

The Federal Reserve lowered rates by three-quarters of a percentage point last year, moves designed to support the job market while maintaining enough economic restraint to address price pressures above the 2% target. Goolsbee's current stance reflects a shift in focus, as he stated he is "no longer worried that the job market is getting too soft."

Goolsbee warned that undermining central bank independence could have severe consequences: "Anything that's infringing or attacking the independence of the central bank is a mess, you're going to get inflation come roaring back if you try to take away the independence of the central bank." This concern extends globally, as the Fed's independence is widely regarded as crucial for international financial stability given the U.S. dollar's central role in global trade and capital flows.

Trump has escalated his verbal assault on Federal Reserve Chair Jerome Powell, delivering his harshest criticism yet amid a Department of Justice criminal investigation into the central bank's operations. Speaking to reporters outside the White House, Trump called Powell either "incompetent or crooked" while referencing cost overruns in the Fed's headquarters renovation project.

Trump's Escalating Rhetoric

Trump's latest attack centered on financial management issues at the Federal Reserve, specifically targeting cost overruns in the multibillion-dollar renovation of the Fed's Washington headquarters. "He's billions of dollars over budget," Trump stated, directly linking his criticism to the renovation project that has become the focus of the DOJ's probe.

The confrontation reached a particularly personal tone when Trump declared, "That jerk will be gone soon," representing his most aggressive language yet toward the Fed chair. Trump's comments came after being questioned about whether the DOJ investigation erodes trust in the Federal Reserve's traditional independence from executive branch interference.

DOJ Investigation Details

The Department of Justice investigation has focused on cost overruns and Powell's congressional testimony regarding the Fed's headquarters renovation. According to official statements, the United States Attorney's Office contacted the Federal Reserve multiple times to discuss these issues but received no response, necessitating the use of legal processes.

Powell responded on Sunday night, claiming the DOJ threatened "criminal indictment" and sent grand jury subpoenas related to his earlier Senate testimony about the ongoing renovations. The Fed chair drew a direct connection between the investigation and Trump's repeated complaints about the pace of interest rate cuts.

Bipartisan Pushback

Trump's attack on Powell has generated significant bipartisan criticism, with lawmakers and business leaders defending the Federal Reserve's independence. JPMorgan Chase CEO Jamie Dimon publicly stated, "Everyone we know believes in Fed independence," reflecting broader business community sentiment.

The criticism spans party lines, with both Democratic and Republican figures expressing concern about potential executive branch interference in Federal Reserve operations. This bipartisan response highlights the traditional respect for Fed independence that has characterized American monetary policy for decades.

Federal Reserve Response

The Federal Reserve issued a video message from Powell addressing the situation, though specific details of his response were not elaborated. The central bank's public communication represents an unusual step, given the institution's typical preference for measured, technical communications rather than political responses.

The controversy occurs against the backdrop of ongoing monetary policy debates, with Trump having previously criticized the Fed's approach to interest rate adjustments. Powell's position as Fed chair, traditionally insulated from political pressure, has become increasingly politicized under these circumstances.