Jerome Powell’s Term End: A Legacy of Independence Under Fire
Federal Reserve Chair Jerome Powell has consistently maintained a “just-the-facts” persona throughout his tenure. However, as his term as chair approaches its end in mid-May, Powell recently offered a glimpse into his priorities and concerns, particularly regarding the Fed’s independence. This comes amidst increasing political pressure and scrutiny.
Advice for the Next Chair
During a recent press conference, CNN’s Matt Egan asked Powell what wisdom he would impart to his successor. After a thoughtful pause, Powell revealed three key pieces of advice. This surprisingly personal response underscored his commitment to the “public well-being” and a steadfast avoidance of political interference – a legacy he aims to leave at the institution he’s served for 14 years, nine as its chair.
The Fight for Independence
The Fed’s independence has been increasingly threatened, notably by the Trump administration’s criticisms and attempts to influence monetary policy. Powell has repeatedly emphasized the necessity of maintaining this independence to ensure the Fed’s credibility and its ability to effectively manage unemployment and inflation. This commitment was demonstrated by his unprecedented attendance at oral arguments in the Supreme Court case involving Fed Governor Lisa Cook, challenging attempts to remove her.
Pushback Against Political Attacks
President Trump and his allies have relentlessly attacked the Fed, alleging it was too slow to lower borrowing costs. This escalated beyond rhetoric, with legal challenges aimed at removing Biden-appointed Governor Lisa Cook. Powell’s recent reflections, though not directly mentioning Trump, were widely interpreted as a direct response to these actions. His work to safeguard the Fed’s independence appears to be having an effect, rallying support for the institution.
A Federal Probe and Powell’s Response
The situation took a further turn when federal prosecutors investigated aspects of Powell’s congressional testimony related to renovations at the Fed’s headquarters. Powell vehemently defended the Fed, describing the probe as a “pretext” to undermine its independence and subject monetary policy to political pressure. He reiterated that the Fed’s independence has “served the people well.”
Bipartisan Support and Congressional Response
Several members of Congress, including Republicans, have voiced support for Powell and the Fed’s independence. Senator Thom Tillis, a member of the Senate Banking Committee, stated he would oppose any nominee to replace Powell until the legal matter is resolved. Other senators, like Lisa Murkowski and Susan Collins, also affirmed the importance of an independent Fed. Even some Trump allies, like Senator John Kennedy, expressed confidence in Powell’s integrity.
The Importance of an Independent Central Bank
Fed officials consistently point to academic research demonstrating that an independent central bank often leads to better economic outcomes. Current and former officials have actively defended the Fed’s ability to set interest rates free from political influence. The Supreme Court case involving Governor Cook, attended by Powell and other Fed leaders, further highlighted the stakes.
A United Front from Former Chairs
In a powerful display of solidarity, all living former Fed chairs – Ben Bernanke, Janet Yellen, and Alan Greenspan – issued a joint statement supporting Powell’s defiance of political interference. They condemned the federal probe as an “unprecedented attempt” to undermine the Fed’s independence, warning that such actions are characteristic of emerging markets with weak institutions and can have detrimental consequences for economic stability. Learn more about the Federal Reserve.
As Powell’s term nears its end, the fight for the Fed’s independence remains a critical issue, with implications for the future of US monetary policy and economic stability.
