Goldman's top economist says Fed probe threat adds to independence worries

By David Milliken

LONDON, Jan 12 (Reuters) - Goldman Sachs' chief economist Jan Hatzius said on Monday that a criminal indictment threat facing Federal Reserve chief Jerome Powell would reinforce worries about the U.S. central bank's independence, but he expected the Fed to continue to make decisions based on data.

U.S. President Donald Trump's ?administration has ramped up its pressure on the Fed, threatening to indict Powell over comments to Congress about a ?building renovation project, an action Powell called a "pretext" by the administration to gain more ?influence over interest rates which Trump wants cut dramatically.

"Obviously there are ?more concerns that Fed ?independence is

going to be under the gun, with the latest news on the criminal

investigation into Chair Powell really having ?reinforced those

concerns," Hatzius said at Goldman Sachs' annual ?global strategy

conference in London.

Hatzius is a member of Goldman Sachs' management committee and his comments are the first public remarks by a senior Wall ?Street executive since news of the potential ?probe into ?Powell emerged.

"I have no doubt that he (Powell) in his remaining term as chair is going to make decisions based on the economic data and not be influenced ?one way or the other, cutting more or refusing to cut on the back of data that could push in that direction," Hatzius said.

Goldman has pushed back its forecast for Fed rate cuts and now expects two 25-basis-point reductions in June and September 2026 instead of the previously anticipated moves in March and June.

The shift in rate expectations ?follows Friday's ?softer non-farm payrolls data and reflects signs of a gradually weakening labor market, alongside stronger-than-expected GDP growth and fading tariff impacts.

Hatzius repeated these forecasts in his ?presentation on Monday, and said he thought the risks to the Fed rate forecasts were to the downside.

He added that some decline in tariffs driven by affordability concerns in the run-up to November mid-term elections was likely, and perhaps also if the Supreme Court rules to strike down tariffs.

The U.S. Supreme Court is expected to issue its next rulings on Wednesday as several major cases remain ?pending including the legality of Trump's sweeping global tariffs.

"President Trump and his administration have ways of substituting for that but maybe they won't substitute 100%, either because it's more difficult or because of these affordability concerns," ?Hatzius said.

(Reporting by David Milliken; Writing by Dhara Ranasinghe; Editing by Alun John and Susan Fenton)