Former Fed Chair Powell Shares Warning Over Political Pressure on Central Bank

BOSTON — Former Federal Reserve Chair Jerome Powell warned that efforts by the federal government to exert political pressure on the central bank could undermine public confidence in its independence.

Speaking at the John F. Kennedy Library Foundation in Boston while accepting the John F. Kennedy Profile in Courage Award, Powell said the Federal Reserve and other American institutions are facing a political “stress test” from the administration of Donald Trump, CNBC reported.

Powell, whose term as Fed chair ended May 15, pointed to White House calls for his resignation, a Department of Justice investigation into his tenure as chair and efforts to remove Fed Governor Lisa Cook.

‘Public Will Lose Faith’

“If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well,” Powell said, according to CNBC. “The public would lose faith that the central bank will make decisions based only on what’s best for all Americans.”

As the CU Daly has reported, federal prosecutors in January launched an investigation into the Federal Reserve’s $2.5-billion renovation project at its Washington headquarters. Powell said at the time that the probe stemmed from Trump’s dissatisfaction with the Fed’s refusal to reduce interest rates at the pace and scale the president wanted. CNBC reported the investigation was dropped in April.

Importance of Institutions

In what CNBC described as his first public remarks since leaving the chairmanship, Powell emphasized the importance of protecting long-standing institutions.

“Democratic institutions take much time, effort, and patience to build but can be torn down all too quickly,” Powell said. “It is essential that we preserve what is good about these institutions, even as we strive to improve them.”

Powell was succeeded as Fed chair by Kevin Warsh, who was sworn into the position on May 22. Despite stepping down as chair, Powell remains a governor on the Federal Reserve Board.