the staff of the Ridgewood blog
WASHINGTON, D.C. – In a bold and controversial move, Mohamed El-Erian, a leading economist and president of Queen’s College at Cambridge University, has called on Federal Reserve Chair Jerome Powell to voluntarily step down to safeguard the Fed’s independence amid growing political and economic pressures.
El-Erian, who also serves as chief economic advisor at Allianz and is a former co-chief investment officer at Pimco, made the statement Tuesday morning on X (formerly Twitter), breaking ranks with much of Wall Street, which has largely supported Powell finishing his term through May 2026.
Why El-Erian Says Powell Should Resign
El-Erian believes that Powell remaining as Fed Chair could invite “growing and broadening threats” to the central bank’s autonomy, particularly as political attacks from the White House intensify.
“If Chair Powell’s objective is to safeguard the Fed’s operational autonomy—which I deem vital—then he should resign,” El-Erian posted.
While acknowledging that Powell stepping down would not be the “first-best outcome,” El-Erian argued that it would still be preferable to the current scenario, where the Fed’s independence is increasingly at risk.
The Political Pressure on Powell
Powell has faced mounting criticism from President Donald Trump and his advisers for holding interest rates steady since December. Trump has accused Powell of creating economic uncertainty, particularly in response to the administration’s steep tariff plans.
Adding to the tension, Treasury Secretary Scott Bessent recently stated that the Fed has suffered from “mission creep”, taking on responsibilities beyond its core monetary policy role. Bessent suggested the entire central bank should undergo a comprehensive review.
Wall Street’s Reaction vs. El-Erian’s View
Many Wall Street analysts believe Powell should stay on and serve out his term to maintain stability. But El-Erian says this thinking underestimates the long-term institutional risks of allowing political pressure to undermine the Fed’s credibility.
If Powell resigns, it would send a powerful message about the importance of keeping the Federal Reserve free from political interference, even if it causes short-term market volatility.
What’s Next for the Federal Reserve?
Powell’s term runs through May 2026, but the escalating attacks from the White House and calls for a full Fed review have fueled uncertainty about the central bank’s future leadership.
For now, Powell has stood firm, stating that Trump’s tariff policies have added to economic unpredictability, justifying the Fed’s decision to pause rate changes until the outlook becomes clearer.
Whether Powell chooses to stay the course or heed El-Erian’s unprecedented call for resignation could have major implications for U.S. monetary policy, investor confidence, and global markets.
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Powell caving to outside pressure would be the exact opposite of independence.