Jay Powell warns political ‘stress test’ will undermine public trust in the Fed

Former Federal Reserve Chairman Jerome Powell warned that any attempt by the U.S. government to exert greater political pressure on the central bank would undermine public confidence in its independence.

Powell, whose term as Fed chair ended on May 15, said the Fed, along with other institutions such as courts and universities, was facing a political “stress test” from President Donald Trump’s administration.

Speaking at the John F. Kennedy Library Foundation in Boston, Mr. Powell highlighted the White House’s demand for his resignation, the Justice Department’s criminal investigation into his time as chairman, and the attempt to remove Fed Director Lisa Cook.

“If any administration can find a way to fire Fed officials over policy differences, future administrations will do the same,” Powell said while accepting the John F. Kennedy Profile of Courage Award. “The public will lose confidence that central banks will make decisions based solely on what is best for all citizens.”

In January, federal prosecutors launched an investigation into the $2.5 billion renovation of the central bank’s Washington, D.C., headquarters.

Powell said at the time that the study, which was halted in April, stemmed from President Trump’s frustration with the Fed’s refusal to cut interest rates at the pace and amount he wanted.

“Democratic institutions take a lot of time, effort, and patience to build, but they can crumble in an instant,” Powell said in his first public remarks as chairman.

“It is essential that we preserve what is good about these institutions while working to improve them.”

Powell’s successor, Federal Reserve Chairman Kevin Warsh, took office on May 22. Despite stepping down as chairman, Powell continues to serve on the Fed’s board.