Former US Federal Reserve Chair Jerome Powell warned that mounting political pressure on the central bank could damage public confidence in its independence and decision-making.
Powell, whose term as Fed chair ended on May 15 and is now a Fed governor, said the central bank was facing a political “stress test” from the Trump administration, along with other US institutions such as courts and universities.
Speaking at the John F. Kennedy Library Foundation in Boston after receiving the Profile in Courage Award on Sunday, Powell, said attempts by any administration to remove Fed officials over policy disagreements would create a precedent for future governments.
“If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well,” Powell said. “The public would lose faith that the central bank will make decisions based only on what’s best for all Americans.”
Powell pointed to pressure from the White House for his resignation, a Justice Department criminal investigation into a $2.5 billion renovation of the Fed’s Washington headquarters and efforts to remove Fed Governor Lisa Cook.
Federal prosecutors opened the probe in January, while the investigation was dropped in April. Powell earlier said the probe stemmed from President Donald Trump’s frustration over the Fed’s refusal to cut interest rates at a quick pace.
Powell said democratic institutions require significant time and effort to build, but can be damaged quickly.
“It is essential that we preserve what is good about these institutions, even as we strive to improve them,” he said.
Kevin Warsh was sworn in as Powell’s successor as Fed chair on May 22.