Jerome Powell, the Federal Reserve Chairman, is facing calls for his resignation from prominent economist Mohamed El-Erian. El-Erian believes that Powell should step down to protect the central bank’s independence from escalating attacks by President Donald Trump. El-Erian, the chief economic advisor at Allianz and president of Queen’s College at Cambridge University, acknowledged that his view is outside the Wall Street consensus.
However, he argues that Powell’s resignation would be preferable to the current situation, where the Fed faces growing threats to its autonomy. “The attacks on Chair Powell are now extending to the whole institution,” El-Erian said. “The longer Powell stays in power, the more that process will continue, fundamentally threatening the independence of the Fed.”
While El-Erian’s perspective is admittedly unpopular, he contends that Powell becoming a “lame duck” Fed Chairman could be detrimental.
He suggests that Powell’s departure now would spare the Fed from months of political attacks. However, some prominent figures sharply disagree with El-Erian’s stance. Alan Blinder, the former No.
2 official at the Fed, stated, “This would be like saying when you’re getting bullied, the best thing to do is cave in.” Blinder added that if Powell steps aside, it would create a terrible precedent for the future. Ed Mills, managing director and Washington policy analyst at Raymond James, echoed Blinder’s sentiment. He stated that a resignation would appear as if Powell was forced out, which could be damaging to the Fed’s credibility.
Former Fed official Bill English also rejected El-Erian’s argument, stating that Powell’s resignation would not prevent political control over the institution.
El-Erian’s call for Fed change
Meanwhile, Treasury Secretary Scott Bessent, while defending the Fed’s independence, described Powell as a “good public servant” and saw no reason for him to step down early.
Bessent supported Powell completing his term, which ends in May. Powell himself has indicated his intention to remain in his position. “I fully intend to serve all of my term,” he stated.
“I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None whatsoever. You will not see me getting in the lifeboat.”
The debate over Powell’s potential resignation comes amid heightened tensions between the Fed and the Trump administration.
President Trump and his advisers have increased their criticisms of the Fed’s decision to keep interest rates steady since December. Trump seemed willing to allow Powell to complete his term as Fed chair, at least for now. “He’s going to be out pretty soon anyway,” Trump said, indicating he would wait out Powell’s term, which ends in May of next year.
Despite the president’s attacks, the Fed has held interest rates steady this year largely due to concerns that Trump’s tariffs could spark an increase in inflation. Policymakers had previously indicated they may consider cutting rates later this year. The economist’s debate over Powell’s potential resignation underscores the broader tension between maintaining central bank independence and navigating the political pressures exerted by the administration.
The Fed’s credibility and willingness to make hard decisions based on data are seen as vital national assets by supporters of its independence.
