Chicago Fed President supports Powell, emphasizes the independence of the Federal Reserve and a wait-and-see stance

The issue of the Federal Reserve's independence has recently become a focal point of attention in the U.S. political arena and markets. According to Zhitong Finance APP, Chicago Fed President Austan Goolsbee expressed strong support for Fed Chairman Jerome Powell during a media interview on Friday, emphasizing that the central bank's independence is crucial for the economy. He stated that Powell is a "person of great integrity" and noted that "almost all economists agree that central banks should be independent of political interference; otherwise, it will adversely affect inflation, growth, and the labor market." Goolsbee's remarks come at a time when former President Trump and his allies are intensifying pressure on Powell. Trump has criticized Powell for being "too cautious" with interest rate policies, expressing dissatisfaction with his "wait-and-see" attitude and concerns about tariff-induced inflation risks. There have even been recent rumors that Trump intends to dismiss Powell, although he himself has denied this while not completely ruling out the possibility. In the interview, Goolsbee emphasized, "In countries where central banks lack independence, inflation is generally higher, economic growth is weaker, and unemployment is more severe." He candidly stated, "I feel very pained when I hear discussions about whether the Fed's independence should be stripped away, as such discussions only bring negative consequences." In addition to political pressure, Powell is also facing a new round of scrutiny from Trump's camp. White House officials have raised concerns about the $2.5 billion renovation project at the Fed's headquarters, questioning whether Powell accurately disclosed the use of the funds during his congressional testimony, intending to undermine his credibility. Although Goolsbee did not directly respond to these criticisms, he referred to Powell as a "first-ballot Hall of Fame-level" chairman, emphasizing his dedication and integrity, aiming to provide support for Powell. On interest rate policy, Goolsbee aligns with Powell's stance, advocating for a "wait-and-see" approach. He pointed out that while tariffs are pushing up commodity prices, this has not yet spread to service prices, "which keeps us in a state of waiting and observing." He added that the Trump administration's "rolling, phased" tariff strategy has made it more complex to assess its inflation impact. "This is not a one-time price spike, but rather a continuous 'drip effect,' which will only delay our confirmation of whether we return to the 2% inflation target, thus postponing the timing of interest rate cuts." When asked if he supports a rate cut this fall, Goolsbee stated that if inflation data continues to be moderate in the coming months, he would be more confident in taking rate-cutting measures. However, if tariffs lead to sustained price increases, he would reassess his policy stance. In contrast to Goolsbee's "cautious wait-and-see" position, Fed Governor Christopher Waller is more inclined to cut rates as soon as possible. He stated on Thursday that he supports a rate cut at the July 30-31 meeting and hinted that if most officials decide to hold steady, he might cast a "no" vote. Waller emphasized that the inflation caused by tariffs is mostly "transitory" and that more attention should be paid to supporting the labor market. In an interview with Bloomberg Television, he noted, "While frequent opposition is not a good thing, if you firmly believe that a rate cut should happen at this critical moment, you must express it clearly." Waller's remarks have fueled market expectations for a rate cut, benefiting gold prices, which have risen. Since gold does not generate interest income, it is typically more attractive during periods of declining interest rates. Spot gold rose 0.35% to $3,350.46 per ounce At the same time, U.S. Treasury yields have fallen in tandem with the dollar, reflecting an increasing market expectation for a policy shift by the Federal Reserve within the year. Although the swap market currently considers the probability of a rate cut at the July meeting to be nearly zero, the cumulative rate cut expectation for the year is about 45 basis points, slightly lower than the 65 basis points at the beginning of the month, mainly influenced by the strong employment data released on July 3. Data released by the University of Michigan on Friday showed that consumers expect an inflation rate of 4.4% over the next year, down from 5% last month, marking the lowest level since February, but still above the Federal Reserve's target of 2%. This data further confirms the "ambiguity" of the inflation path and is a significant reason for the internal divisions within the Federal Reserve regarding whether to cut rates