Jay Powell warns political ‘stress test’ will harm public trust in Fed
Former Federal Reserve chairman Jerome Powell warned that any attempts by the US government to apply more political pressure on the central bank would undermine public confidence in the bank’s independence.
Powell, whose term as Fed chairman ends May 15, said the central bank, along with other institutions such as courts and universities, are facing a political “stress test” from President Donald Trump’s administration.
Speaking at the John F. Kennedy Library Foundation in Boston, Powell highlighted White House pressure for his resignation, the Justice Department’s criminal investigation into his time as president and attempts to fire Fed governor Lisa Cook.
“If any administration can find a way to remove Fed officials over policy differences, then future administrations will do the same,” Powell said while accepting the John F. Kennedy Profile in Courage Award. “The public will lose faith that the central bank will make decisions based solely on what is best for all Americans.”
Federal prosecutors opened an investigation in January into the $2.5 billion renovation of the central bank’s Washington, D.C., headquarters.
At the time, Powell said the investigation, which was later dropped in April, stemmed from Trump’s frustration with the Fed’s refusal to cut interest rates at the pace and volume the president wanted.
“Democratic institutions take a lot of time, effort and patience to build, but they can be destroyed very quickly,” Powell said in his first public statement since his term as president.
“It’s important that we preserve what’s good about these institutions, even as we work to improve them.”
Powell’s successor, Fed chairman Kevin Warsh, was sworn in on May 22. Despite resigning as chairman, Powell continues to serve as Fed governor.
