El-Erian urges Powell to resign for the sake of Fed independence

In recent months, discussions around the Federal Reserve's independence and its leadership have escalated in the United States. Prominent economist Mohamed El-Erian proposed that Jerome Powell should resign as chairman of the Federal Reserve to safeguard the institution's operational autonomy. El-Erian, who has held significant positions including CEO of PIMCO, asserted that Powell's continuation in office may perpetuate attacks on the Fed, particularly amid increasing criticism from political figures including President Donald Trump. Trump's dissatisfaction stems from Powell's reluctance to lower interest rates, which the president believes are hindering economic growth. El-Erian's comments come at a time when the Fed's credibility is perceived to be under threat due to external political pressures. In a social media post, he expressed that Powell should only serve until his tenure concludes in May, as remaining longer would expose the central bank to further challenges regarding its independence. This viewpoint, while not widely accepted, reflects deep concerns among some economists about the increasing interference of politics in monetary policy decisions. The situation illustrates a broader debate in the country about the role of the Federal Reserve and the necessity for it to operate free from political influence. While many former and current Fed officials emphasize the importance of maintaining this separation, there are differing opinions about whether resigning would establish a precedent or be a necessary step. Notably, Treasury Secretary Scott Bessent and former Fed officials argue against El-Erian's suggestion, highlighting that a resignation may not address the underlying issue of political control. Trump has characterized Powell as ineffective due to his refusals to cut interest rates, going so far as to label him “Too Late.” These tensions have provoked discussions about how both the markets and the Fed itself would respond if Powell were to resign or be replaced. Despite calls for change, many experts believe that Powell’s leadership, persisted until the end of his term, could reassert the central bank’s independence and ability to act based on economic realities instead of political pressure.