Powell Emphasizes Fed Independence
Former Federal Reserve Chairman Jerome Powell warned that the US central bank's credibility would be undermined if the president could dismiss Fed officials simply because of policy differences. In a speech prepared for the John F. Kennedy Profile in Courage Award in Boston on Sunday, Powell said independence is key to ensuring the public trusts that monetary decisions are made in the broader interest, not politically.
Powell argued that if one administration successfully removes Fed officials for policy reasons, subsequent administrations will be encouraged to do the same. He argued that such a pattern would erode public confidence in the Fed's ability to consistently maintain economic stability, thereby diminishing the central bank's most important asset, credibility.
These remarks marked Powell's first public comments since he was replaced as Fed chairman by Kevin Warsh. Powell remains on the Board of Governors and said his decision to remain at the Fed was influenced by his concerns about attacks on the central bank. His term as governor is set to expire in January 2028.
The issue arose as the US Supreme Court considered a case involving Fed Governor Lisa Cook. President Donald Trump is seeking to fire Cook over so-called unproven mortgage fraud allegations, while Cook denies the allegations. The question now is whether Cook can remain in office while lower courts are still processing the main case.
Powell also highlighted the existence of legal safeguards designed to insulate monetary policy from political interference, while calling for respect for the rule of law. For the market, this dynamic is important because the perception of the Fed's independence plays a role in shaping interest rate expectations and the credibility of policy communications; investors are likely monitoring developments in the Supreme Court, the White House's response, and messages from the new Fed leadership regarding the consistency of the policy framework. (asd)
Source: Newsmaker.id
