Trump continues to pressure Powell! Chicago Fed President warns: Do not limit the independence of the Federal Reserve.

Recently, after US President Trump continued to pressure Federal Reserve Chair Powell, Chicago Fed President Austan Goolsbee issued a warning last Sunday about Trump's attempts to limit the independence of the Fed. He said on a program, "Economists almost unanimously agree that monetary independence is not subject to political interference, that the Fed or any central bank can do what it needs to do, and this is really important." Goolsbee stated, "I strongly hope that we do not find ourselves in an environment where the independence of the currency is questioned. This will damage the Fed's reputation." He added that in countries where the central bank lacks monetary independence, "the fact is, inflation rates are higher, economic growth is slower, and the job market is worse." Challenges to Fed Independence Last Wednesday, Powell's speech at the Economic Club of Chicago hinted that the Fed will not take emergency measures in response to market fluctuations. Powell said that tariff measures may lead to short-term inflation, posing challenges to the central bank in achieving its two policy goals of price stability and full employment. It is important to avoid long-term high inflation, which depends on the size of the tariff impact, the speed of transmission, and whether long-term inflation expectations can be stabilized. If there is a conflict between inflation and employment targets, Powell suggested that the Fed may prioritize controlling inflation. He said, "Without price stability, we cannot achieve a strong labor market that benefits people in the long term." Powell stated, "In some cases, we may be in a situation where there is tension between goals." "At that time, we need to assess the degree to which the economy deviates from each goal, and the time differences required to achieve different goals." This statement was interpreted by the market as an increase in uncertainty about the Fed's monetary policy path. Powell did not explicitly state his view on interest rate trends, but pointed out, "Currently, we have enough leeway to maintain our policy stance and wait for clearer economic signals before considering adjustments." Trump's strong criticism of Powell immediately followed Powell's remarks. On April 17, Trump criticized the Fed for not cutting interest rates sooner and said he could have Powell removed immediately. On April 18, Trump reiterated that Powell should lower interest rates at the White House. On the same day, White House National Economic Council Director Kevin Hassett confirmed that Trump and his team were exploring whether Powell could be fired. In fact, since the start of Trump's second term, the conflict between him and Powell has intensified. Trump has repeatedly called for rate cuts after taking office. Analysts have pointed out that the conflict between Trump and Powell highlights the deep divisions between the US government and the central bank on monetary policy. Trump has consistently advocated an "economy first" approach, believing that tax cuts and deregulation can inject strong momentum into economic growth. Powell, on the other hand, focuses more on long-term economic stability and risk prevention. Meanwhile, this conflict has raised widespread concerns about the erosion of the Fed's independence. The Fed's independence has long been seen as a key factor in maintaining macroeconomic stability. However, whenever political forces attempt to intervene in central bank policy, it often leads to uncontrolled inflation or loss of market confidence. Former Fed Chair Ben Bernanke has warned that "political interference in monetary policy could lead to a harmful boom-bust cycle, ultimately resulting in economic instability and rising inflation." Sarah Binder, a senior fellow at the Brookings Institution, also pointed out, "The Fed needs public confidence. But if the president tries to remove Powell, it will only increase uncertainty." Kathy Jones, Chief Fixed Income Strategist at the Schwab Center for Financial Research, cautioned that attempting to remove Powell could exacerbate selling of US Treasuries and the dollar. Those around Trump also seem to understand the concerns about the erosion of the Fed's independence. According to sources, Trump has discussed with former Fed Governor Kevin Warsh the possibility of dismissing Powell before the end of his term, and considering having Warsh succeed as Fed Chair. However, Warsh advised Trump not to fire Powell, arguing that he should be allowed to complete his term to preserve the Fed's independence. US Treasury Secretary Steven Mnuchin privately warned Trump that replacing the Fed Chair could increase market uncertainty and weaken investor confidence. Can Trump Fire Powell? Trump claims that he has the power to dismiss Powell. Trump said, "If I want him to leave, he will leave immediately, believe me." He also added that he is extremely dissatisfied with Powell's performance on interest rate issues, accusing him of "playing politics." Powell stated last November that he will not resign because of Trump's threats, and the law does not allow Trump to unilaterally dismiss him. This statement not only assuaged market anxiety, but also demonstrated Powell's firm determination to defend the Fed's independence. Last Wednesday, Powell reiterated that the Fed's independence "is a legal issue" and "unless there is a legitimate reason, we will not be removed." If Trump does try to dismiss Powell, the related events will almost certainly end up in the US Supreme Court. This move would not only bring enormous pressure to Powell's successor, but might also cause market turmoil, as the market would be concerned about the precedent of a Fed Chair being removed due to policy disagreements. Sources revealed that the Trump administration submitted an urgent request to the Supreme Court on April 12, seeking authorization for the immediate dismissal of National Labor Relations Board (NLRB) Chair Gwen Wilcox and Merit Systems Protection Board (MSPB) Chair Casey Harris. This move is seen as a direct challenge to the 1935 Humphrey's Executor case law. If the Supreme Court supports this request, it would clear legal obstacles for Trump to dismiss Powell. Although current law requires "legitimate reasons" for dismissing the Fed Chair, overturning the Humphrey's Executor case after 80 years would break the balance of powers. At that time, the president could invoke constitutional provisions to directly remove Powell without providing specific reasons.