Goolsbee on Cutting Interest Rates: Federal Reserve Independence from Political Interference Is ‘Critically Important’

EXCERPT:

GOOLSBEE: “Well, I think two things. One, I’m a huge fan of Jerome Powell as a Fed chair. I think he’s a first ballot Hall of Famer in anyone’s book. And I think that Fed independence from political interference is critically important. And its virtual unanimity among economists that that monetary independence remain. If you just look at countries where they don’t have it, inflation is higher, growth is slower, the unemployment rate is higher, the economic outcomes are worse. If you then say, what should the Fed do in response to tariffs, to other policies, to geopolitics? The answer is it depends on conditions. As you know, Erin, the law gives the Fed the job when setting monetary policy, stabilize prices and maximize employment. It’s a simple idea. It’s not always easy to carry out, but our job is to look at the hard data. And if we have something that’s both deteriorating economic growth and driving up the prices, that is to say, something that is stagflationary, there’s not a generic answer to what the Fed should do in response to that. Depends how much it drives up prices, how long it’s going to last, and how much it reduces growth.”