Powell Says Fed Credibility Would Crumble if President Could Fire Officials Over Policy Disputes

Former Federal Reserve Chair Jerome Powell publicly raised concerns about any erosion of central-bank independence.

Bloomberg reported on June 1 that Powell, speaking at the Profile in Courage award ceremony at the John F. Kennedy Presidential Library in Boston, said the Fed’s credibility would collapse if a president were allowed to dismiss central-bank officials over policy disagreements.

If one administration sets a precedent of removing Fed officials over policy differences, future administrations would repeat it. The public would come to believe the Fed makes decisions for political purposes rather than in the interests of the US as a whole.

The Fed’s credibility is an asset built over decades, Powell said, and the central bank has a duty to protect that asset for future generations.

The remarks came as President Donald Trump seeks to remove Fed Governor Lisa Cook. Trump has alleged that Cook was involved in mortgage-related fraud, while Cook has denied the accusation.

The question of whether Cook will remain in her post is now before the US Supreme Court.

Powell also said the Fed’s legal independence was designed to shield monetary policy from political pressure. Respect for the rule of law is a defining principle of the US, he added.

Bloomberg said the comments amounted to another public criticism of the Trump administration. Powell repeatedly clashed with Trump during his tenure as the president pressed for lower interest rates.

Powell was also named a co-recipient of this year’s Profile in Courage Award by the JFK Foundation in recognition of his defense of Fed independence.