Sep 10, 2025
The Federal Reserve announced on July 30 it would hold its benchmark interest rate steady — despite increasing pressure from President Donald Trump to lower the rate. Weak job numbers released by the government since then have strengthened the case for a cut ahead of the Fed’s next rate announcement on Sept. 17.
Amid this pressure, Mohamed El-Erian is calling on Federal Reserve chair Jerome Powell to call it quits — becoming one of the first mainstream economic voices to suggest Powell voluntarily step down to preserve Fed independence.
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“If Chair Powell’s objective is to safeguard the Fed’s operational autonomy (which I deem vital), then he should resign,” El-Erian, chief economic advisor at Allianz and current president of Queen’s College in Cambridge, wrote in an X post on July 22.
But not everyone agrees. Here’s what experts and analysts are saying — and why the central bank’s independence is so important.
Why El-Erian thinks Powell should resign
For months, Trump has demanded that Powell steeply cut interest rates. The Fed has held them steady — in the 4.25%-4.5% range — since December, partly over concerns that tariffs could reignite inflation.
As the Fed holds steady, Trump has called Powell names — like “numbskull” and “truly one of my worst appointments” — and floated the idea of firing him.
Treasury Secretary Scott Bessent, in a July 21 post on X, said the central bank should conduct an internal review of its non-monetary policy operations.
“Significant mission creep and institutional growth have taken the Fed into areas that potentially jeopardize the independence of its core monetary policy mission,” he wrote.
The next day, Bessent told Fox Business that “there’s nothing that tells me that he should step down right now.” Powell’s term ends in May 2026.
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But El-Erian sees the pressure being put on the Fed as a red flag. In his post on X, he noted the government’s criticism of Powell and the Fed had “broadened to include ‘mission creep’ and the effectiveness of other officials.”
And, if threats to Fed independence continue, that could result in a weaker dollar and a steeper yield curve with higher interest rates, El-Erian told Axios.
While he recognized in his post on X that the call for Powell to resign isn’t the “consensus view,” he also said it’s “better than what is playing out now — growing and broadening threats to Fed independence,” which will “undoubtedly increase should he remain in office.”
But other experts and analysts disagree.
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Why others think Powell needs to stay
“If the Fed chair became a rubber stamp subject to presidential diktat, I think we would have lost the independence of the Federal Reserve on monetary policy,” Lawrence H. Summers, American economist and former Treasury Secretary, posted on X.
Alan Blinder, a macroeconomist and former vice chairman of the Fed, told CNN that he “couldn’t disagree more vehemently” with El-Erian.
“This would be like saying when you’re getting bullied, the best thing to do is cave in,” he said, adding that Powell stepping aside would create “a terrible precedent for the future.”
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Some fear that if Powell steps down, the Fed might capitulate to Trump and prematurely lower interest rates, fueling inflation.
“Powell’s removal or resignation is likely to trigger a new round of severe downward volatility in the dollar, and the damage would be there to stay,” according to an analysis by ING.
“If you fire the chairman of the Federal Reserve, you will see the stock market crash, and you will see the bond market crash,” Republican U.S. Sen. John Kennedy of Louisiana told CNN.
El-Erian concedes Powell’s abrupt resignation would cause market jitters, “but ultimately the volatility will be less than the alternative,” he told CNN, “which is escalating attacks on the Fed.”
No Fed chair has ever been removed by a president, and in the unlikely event it happened, it would mean wading through uncharted legal waters. So the decision, ultimately, could rest with Powell himself — and he shows no signs of giving in to Trump’s demands.
“The best defense for the Fed is to get the policy right,” Bill English, former director of the Fed’s division of monetary affairs, told CNN. “I feel sorry for [Powell], but the best he can do at this point is hang tough and do the best job he can on monetary policy.”
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Vawn Himmelsbach is a veteran journalist who covers tech, business, finance and travel. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, CBC News, Yahoo Finance, MSN, CAA Magazine, Travelweek, Explore Magazine and Consumer Reports.
