In wake of DOJ probe, Fed officials voice strong words in defense of Powell, Fed independence

In the wake of the Justice Department opening a criminal investigation of Federal Reserve Chair Jerome Powell, a chorus of Fed officials have rallied to his defense.

New York Fed president John Williams described Powell as a “a man of impeccable integrity,” who has upheld the Fed’s public mission and effectively led the central bank during times of uncertainty.

Chicago Federal Reserve president Austan Goolsbee called Powell a “first-ballot hall of fame Fed chair.”

Powell, whose term as chair ends in May, has been under unrelenting pressure from President Trump to lower interest rates. Powell delivered on that demand at the end of last year, with the Fed trimming rates in each of its last three meetings.

But Trump remains unsatisfied, on Tuesday calling Powell either “incompetent or crooked.”

“He’s done a bad job,” Trump said. “We should have lower rates.”

Several Fed officials seized on the extraordinary escalation in both rhetoric and threats from the administration to underscore the importance — to the economy — of monetary policy set without regard to such pressure.

Read more: How much control does the president have over the Fed and interest rates?

Goolsbee warned that the attacks on Powell and the Fed could send inflation “roaring back” and told CNBC, “if you’re investigating as a pretext because you disagree with the rate decisions, that’s a mess. We should not be in that place.”

Powell revealed Sunday that he is facing a criminal investigation his into testimony about the renovation of the Fed’s Washington headquarters — a probe he says is really about further pressuring him to bend to Trump’s will and lower rates.

Fed governor Michael Barr called the investigation “an assault on the independence of the Fed,” noting that this along with Trump firing Fed governor Lisa Cook are examples of the ways that independence is being challenged.

“We are acting only for economic reasons,” Barr told Yahoo Finance in an interview. “We are acting only according to our congressional mandate. That’s to make sure that we have price stability and maximum employment. That’s what we’ve been focused on all along, and that’s what we will stay focused on.”

St Louis Fed president Alberto Musalem said Monday that independent monetary policy that’s set without political interference leads to better outcome of more stable inflation and higher employment.

“Central bank independence with respect to monetary policy is a valuable asset for a country,” he said. “I observe that the public, be they consumers or business leaders or elected officials, have recognized the value of having a Fed that can set monetary policy without political interference to deliver better outcomes.”

Tensions between Powell and Trump have been bubbling since the day Trump took office in his second term.

Unhappy with how high rates were, Trump threatened to fire Powell, touching off a major sell-off in markets that ultimately caused the president to back off of that threat.

Tensions ratcheted up again over the summer, when the administration and Republicans seized on Powell’s testimony before the Senate Banking Committee about renovations of the Fed’s headquarters in Washington, suggesting that Powell had mischaracterized the nature and costs of the renovations to lawmakers.

Then in a rare visit to the Fed’s headquarters in July, Trump donned a hard hat and toured the construction site with Powell as the two disagreed publicly about the cost overruns. Trump said the Fed was over budget running at $3.1 billion, a figure Powell disputed on the spot.

Things seemed to cool a bit over the fall as the Fed embarked on three consecutive policy meetings of rate cuts amid concerns about the health of the labor market and as the impact of tariffs on inflation were better than feared.

However, by the end of December, Trump was back to his usual criticisms and even threatened to sue Powell.

Fed governor Stephen Miran, who is on leave from his role as a top economic advisor to Trump, had a different response last week when asked about the heads of multiple foreign central banks who came to Powell’s defense.

“I don’t think it’s appropriate for central bankers to get involved in non-monetary policy, non-monetary policy issues … in their own country,” Miran said while speaking in Greece, “and I think it’s even less appropriate in other countries.”

Jennifer Schonberger covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.

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