Top Fed Voices Defend Powell, Slam Trump's Attack On Central Bank Independence

Two prominent Fed voiced issued strong public defenses of the central bank’s independence on Monday, calling out President Donald Trump‘s attacks on Chair Jerome Powell as politically dangerous and economically destabilizing.

Speaking Monday on CNBC, Richard Fisher, former president of the Dallas Fed, warned that Trump's repeated attacks on Powell could inflict serious long-term damage on the credibility of the Federal Reserve and the broader U.S. economy.

"The one thing you don't want to have happen is for the Fed to become politicized," Fisher said.

Fisher added that even if Trump could fire Powell, which remains legally uncertain, it would be a self-defeating move.

"I don't think it's in the president's interest to sack him. The markets would react extremely negatively," he said.

Fisher also highlighted that current uncertainty has already paralyzed corporate decision-making, referencing companies like United Airlines Holdings Inc. UAL, which recently offered dual earnings forecasts due to macroeconomic unpredictability.

"I think the president, frankly, is undermining his own case." "No business can make a decision here," Fisher said. "That uncertainty has been generated by the executive branch."

When asked whether Trump could legally demote or remove Powell, Fisher pointed to historical precedent—most notably in 1979, when President Jimmy Carter reassigned then-Fed Chair G. William Miller to Treasury Secretary after a period of poor economic performance and appointed Paul Volcker in his place.

"I hope it doesn't come to push and shove," he said. "If it does, we're going to see further spread widening, higher interest rates and pressure that damages long-term confidence in the economy."

Fisher also pushed back on the assumption that Fed rate cuts would lower market interest rates, pointing out that recent episodes of easing were followed by yield spikes in longer-term bonds.

"After they cut 50 basis points and then did three more cuts, yields went up—not down. The 10-year rose by 100 basis points," Fisher said. "So even if you force cuts, the market may not respond how you think."

Ultimately, Fisher painted a picture of a market hamstrung by political volatility and a Fed cornered by noise from the White House.

“Forget about the stock market, the FED will always act if the credit markets become dysfunctional.”

Goolsbee: Interference Means ‘Higher Inflation, Worse Growth’

Echoing Fisher's concerns, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, said earlier on CNBC's Squawk Box that interfering with the Fed's independence would erode the institution's credibility and lead to long-term economic pain.

"Fed independence is critically important," Goolsbee said. "When there is interference over the long run, it's going to mean higher inflation, worse growth and higher unemployment."

Although Goolsbee declined to comment directly on Trump's statements, his message was clear: monetary credibility depends on political neutrality, especially when inflation-fighting resolve is needed.

"Just look at the countries where they don't have Fed independence. Inflation is higher, unemployment is higher, growth is worse," he added.

U.S. financial markets came under heavy pressure Monday, with stocks, bonds and the dollar falling in unison, a rare and unsettling signal of deepening investor distrust.

The U.S. Dollar Index (DXY), tracked by the Invesco DB USD Index Bullish Fund ETF UUP, slid to its lowest level since April 2022.

The S&P 500, mirrored by the SPDR S&P 500 ETF Trust SPY, sank 3.3% in one of its steepest single-day drops of the year.

Read Next: