Powell says Fed independence under critical test

Former Federal Reserve Chair Jerome Powell warned that the central bank’s independence is facing a critical test, arguing that allowing administrations to remove its officials over policy disagreements would undermine decades of built credibility and public trust. Powell delivered these remarks on Sunday while accepting the John F. Kennedy Profile in Courage Award at the Kennedy Presidential Library in Boston, his first public comments since stepping down as chair.

Powell stated that if one administration finds a way to remove Federal Reserve officials solely due to policy differences, future administrations will follow suit. He described the Fed’s credibility as a priceless asset essential for its ability to manage monetary policy effectively, including controlling inflation and ensuring financial stability, without political interference. Powell emphasized that such a precedent would cause the public to lose faith that the central bank makes decisions based solely on economic fundamentals.

The warning comes amid a period of heightened political scrutiny of the Fed. While Powell did not mention any president by name in his prepared remarks, his tenure as chair was marked by...