Powell warns Fed independence under ‘stress test’ as political pressure mounts
Jerome Powell cautions that removing officials over policy differences would erode public faith, as President Trump continues to demand sharper interest rate cuts and challenges the board’s composition.
Former US Federal Reserve Chair Jerome Powell has issued a stark warning regarding the political independence of the central bank, describing the institution as undergoing a “stress test” comparable to other public bodies in the current political era. Speaking at an awards ceremony in Boston on Sunday, Powell accepted the 2026 John F Kennedy Profile in Courage Award and emphasised that the Fed’s credibility is a “priceless asset” that must be safeguarded against partisan interference.
Powell noted that Congress had “wisely” insulated the central bank from direct political pressure, a norm he said is upheld across all advanced economies. He argued that administrations from both parties have historically respected these protections, which have served the public well. However, he cautioned that if any administration were to find a way to remove Fed officials over policy differences, it would set a precedent for future leaders to do the same, ultimately destroying public faith in the institution.
The former chair stressed that the Fed’s ability to support a strong and stable economy for American families and businesses relies entirely on its perceived independence. “Our credibility has been built and sustained over many decades,” Powell said, adding that the board has a duty to protect this asset for current and future generations. He warned that losing this credibility would undermine the central bank’s capacity to function effectively.
Although Powell did not name President Donald Trump in his address, the comments follow sustained pressure from the White House regarding interest rate policy. Trump has repeatedly demanded sharper cuts and previously threatened to dismiss Powell during his tenure. The political tension has escalated further with the appointment of Trump ally Jeanine Pirro to investigate Powell’s congressional testimony and the order to remove Fed governor Lisa Cook over unproven claims of mortgage fraud, a move currently being challenged in the Supreme Court.
Under the Federal Reserve Act, the president must demonstrate “cause”, widely interpreted to mean malfeasance, to remove any of the Fed’s governors. Powell, who stepped down as chair last month but remains on the Board of Governors, used the occasion to offer a broader defence of democratic institutions. Citing John Adams, he asserted that the US is “a government of laws and not of men,” urging unity in commitment to the rule of law despite normal partisan differences.
The John F Kennedy Profile in Courage Award, established in 1989, honours those who demonstrate courage in public service without regard to professional or personal consequences. Past recipients include former US President Barack Obama, former UN Secretary-General Kofi Annan, and former Ukrainian President Viktor Yushchenko. Powell’s acceptance of the award underscores the gravity with which the financial establishment views the current challenges to institutional independence.
