Noted economist Mohamed El-Erian suggested that Chairman Jerome Powell‘s resignation could be a strategic move to maintain the operational autonomy of the Federal Reserve.
What Happened: El-Erian took to X to state that the recent criticism from the U.S. government regarding the Federal Reserve’s “mission creep” and the effectiveness of its officials should prompt Powell to consider resigning. He noted that safeguarding the Fed’s operational autonomy is crucial and suggested that this objective could be achieved if Powell steps down.
“If Chair Powell’s objective is to safeguard the Fed’s operational autonomy (which I deem vital), then he should resign,” wrote El-Erian.
El-Erian acknowledged that his suggestion is not the consensus view, but he believes it is a better alternative than the current situation, which he sees as a threat to the Fed’s independence.
“Yet, 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,” stated El-Erian.
He also noted that most of the commonly mentioned contenders to succeed Powell would likely ease any potential market concerns.
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Why It Matters: El-Erian’s suggestion comes at a time when the Federal Reserve is facing significant challenges in formulating its monetary policy. El-Erian had previously warned that the Fed’s path forward is clouded by Trump tariffs and the Israel-Iran conflict, which could impact the Fed’s policy decisions.
El-Erian’s post also follows the recent warning by former Federal Reserve Chairs Ben Bernanke and Janet Yellen about the potential long-term consequences of President Donald Trump‘s pressure on Powell. They emphasized the importance of maintaining the central bank’s independence and urged Trump to select a successor for Powell who would continue to uphold this independence.
At the same time, University of Michigan economist and former Obama White House advisor Betsey Stevenson warned that undermining the Federal Reserve's independence could have serious consequences. She cautioned that mortgage rates might surge if markets begin to doubt the central bank's ability to control inflation.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
