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| WASHINGTON D.C., UNITED STATES - JULY 22: Federal Reserve Chairman Jerome Powell speaks at the Integrated Review of the Capital Framework for Large Banks Conference on July 22, 2025, in Washington DC, United States. Yasin Ozturk/Anadolu via Getty Images |
Federal Reserve Chair Jerome Powell has faced mounting criticism from political leaders, but in a surprising twist, some prominent economists are now suggesting that his resignation might actually preserve the central bank’s independence not jeopardize it.
Despite long-standing concerns that political pressure could undermine the autonomy of the Fed, economists like Mohamed El-Erian and Jeremy Siegel argue that Powell stepping down may be the only way to shield the institution from escalating attacks, especially as President Donald Trump intensifies his scrutiny.
Powell Under Political Fire
The renewed debate over Powell’s future comes amid an increasingly aggressive campaign by Trump and his allies, who have criticized the Fed Chair for failing to cut interest rates and for costly renovations to the Fed’s historic headquarters.
In a recent post on X, Mohamed El-Erian, economist and former PIMCO CEO, suggested that Powell’s resignation though not ideal could help “contain the reputational erosion” now spilling over from the chair’s office to the broader institution.
“It’s better than what is playing out now growing and broadening threats to Fed independence and will undoubtedly increase should he remain in office,” El-Erian wrote.
He emphasized that markets would likely react calmly to Powell’s departure, especially if a well-regarded successor were appointed.
This morning, US government criticism of both Federal Reserve Chair Powell and the institution itself has broadened to include "mission creep" and the effectiveness of other officials.
— Mohamed A. El-Erian (@elerianm) July 22, 2025
The developments of the last few days reinforce my view:
If Chair Powell's objective is to…
A Strategic Exit to Preserve Credibility?
Jeremy Siegel, the Wharton professor and veteran market voice, echoed El-Erian’s concerns during a CNBC interview last week. He warned that Powell could become a scapegoat if the economy weakens later this year especially under a second Trump administration.
“I'm very worried about the independence of the Fed,” Siegel said. “The long-term independence of the Fed may very well be enhanced if he steps down.”
Siegel speculated that Trump could use an economic downturn as leverage to blame Powell for high rates, while simultaneously pushing Congress to grant more presidential control over the Fed. That, he said, could be disastrous for monetary policy.
Siegel also suggested that figures like Kevin Hassett or Kevin Warsh both of whom have previously served in economic roles under Republican administrations could be effective replacements capable of restoring confidence while preserving the Fed's core mission.
Division Among Economic Voices
The debate over Powell’s future is not unanimous. Treasury Secretary Scott Bessent, who criticized the Fed earlier this week for “mission creep” and lack of focus on core policy responsibilities, has since clarified that he does not believe Powell should resign at least not yet.
“There’s nothing that tells me that he should step down right now,” Bessent said on Fox Business Tuesday morning. “His term ends in May. If he wants to see that through, I think he should. If he wants to leave early, I think he should.”
Still, Bessent’s initial comments particularly his call for an internal review of the Fed’s scope add to the broader scrutiny facing the central bank.
A Precarious Moment for the Fed
The current environment puts the Federal Reserve in a precarious position. With inflation pressures cooling but interest rates still elevated, any shift in Fed leadership would come at a delicate moment for markets and the economy.
The political backdrop adds another layer of complexity. If Powell does remain through the end of his term in May, he could face increasing political pressure, especially if Trump wins the presidency and seeks to reshape the Fed’s leadership or mandate.
Regardless of whether Powell stays or steps down, economists and investors alike agree that the central bank’s independence a cornerstone of its credibility is facing one of its most serious challenges in decades.
