The first "Wall Street big shot" to jump ship! El-Erian: Powell should resign for the good of the Federal Reserve
El-Erian believes that the Federal Reserve, under Powell's leadership, has already experienced a series of credibility crises, and Powell should now take the initiative to resign to protect the institutional independence of the Federal Reserve and prevent ongoing political attacks from further damaging its credibility
Wall Street tycoons make a strong statement, calling for Powell to resign proactively to maintain the independence of the Federal Reserve.
As the White House intensifies its criticism of Powell, renowned economist Mohamed El-Erian publicly calls for Powell's resignation, contrasting sharply with most financial leaders.
El-Erian believes that Powell should voluntarily step down to protect the institutional independence of the Federal Reserve and prevent ongoing political attacks from further damaging the Fed's credibility. He stated:
“If your goal is to protect the independence of the central bank, then his resignation is better than staying on and escalating the attacks.”
El-Erian's Reasoning: Internal Missteps at the Federal Reserve
It is noteworthy that El-Erian's call is not based on the Trump administration's accusations regarding the Fed's headquarters renovation project, but rather stems from concerns over a series of credibility crises under Powell's leadership.
During the period of 2021-2022, the Federal Reserve's insistence that inflation was "transitory" led to delayed interest rate hikes, ultimately resulting in soaring prices, making the inflation surge of 2021 the worst since the early 1980s.
In a commentary published in the Financial Times in December 2022, El-Erian referred to Powell's insistence on "transitory" inflation as a "long-term serious misguidance."
Additionally, El-Erian mentioned the 2022 Federal Reserve insider trading scandal, where several senior Fed officials engaged in securities trading during the pandemic. Although Powell himself was cleared by an independent oversight body, the incident led to a decline in public confidence and prompted the Fed to tighten internal rules.
The banking crisis triggered by the collapse of Silicon Valley Bank in 2023 is another significant misstep. Michael Barr, then the Fed's chief regulator, criticized the lack of oversight in a report in April 2023, stating that this contributed to one of the largest bank failures in U.S. history.
El-Erian pointed out that if Powell were a corporate CEO, these missteps would have already led to his ousting.
On Monday, U.S. Treasury Secretary Yellen called for a review of the "entire Federal Reserve system," further intensifying El-Erian's concerns.
He stated, “This is a dangerous signal,” indicating that the government is expanding its criticism from Powell personally to the Federal Reserve itself.
El-Erian predicts that if this political pressure continues, it will undermine the Fed's policy influence, especially as Powell's term is set to end in May 2026, making him a "lame duck" chairman with limited policy guidance
