Austan Goolsbee, President of the Federal Reserve Bank of Chicago, issued a stark warning on Thursday, January 15, 2026, stating that any attack on the Federal Reserve's independence would cause inflation to "come roaring back." His comments came directly after Fed Chair Jerome Powell confirmed receiving a subpoena from the Department of Justice regarding a criminal investigation into the $2.5 billion renovation of the Fed's Washington, D.C. headquarters.
Goolsbee strongly backed Powell's assertion that the investigation could be a pretext for political interference in monetary policy. "I agree with his argument that if you’re investigating as a pretext because you disagree with the rate decisions, that’s a mess," Goolsbee stated, adding that such actions are not normal in advanced economies but are seen in places like "Zimbabwe and Russia and Turkey."
This political pressure escalated dramatically when President Donald Trump announced on January 14, 2026, his intention to name a successor to Powell within the "next few weeks." During a factory tour in Michigan, Trump criticized Powell as either incompetent or "crooked" over the renovation's cost overruns, vowing to replace him well before his term as Chair expires in May 2026.
The move has intensified a fierce debate over central bank independence, with critics viewing it as a power play to install a more dovish leader who would implement more aggressive interest rate cuts. The Fed has already cut its main interest rate three times since September 2025, but Trump has continued to pressure Powell, even dubbing him "Too Late."
Three frontrunners have emerged as potential nominees: former Fed Governor Kevin Warsh (41% probability on Polymarket), seen as a hawkish independent; current National Economic Council director Kevin Hassett (38%), a Trump loyalist; and Treasury Secretary Scott Bessent. However, the confirmation path is blocked by a political stalemate. Retiring Republican Senator Thom Tillis has vowed to block any Trump nominee until the DOJ's investigation into Powell is resolved.
The situation creates unprecedented uncertainty for the Fed's leadership. Powell's term as a Fed Governor lasts until 2028, meaning he could remain on the board and influence policy even if replaced as Chair. The financial world is bracing for a prolonged fight that risks leaving the central bank without confirmed leadership during a critical period.
