Powell warns of political pressure on Fed independence

Jerome Powell has spoken out immediately after stepping down as Fed Chair, warning against political interference in the independence of the U.S. central bank. In a speech accepting the JFK Profile in Courage Award in Boston, the former central bank chief made clear that institutions such as the Federal Reserve, courts, and universities are under pressure and must preserve their independence.

Powell emphasized that the Fed is currently facing a "stress test". The central message of his warning: should a government administration find ways to remove Fed officials because of their policy decisions, the central bank would lose its credibility – an "invaluable asset," as Powell put it. The central bank can only function effectively if it remains protected from political interference.

Warning at a sensitive time

Powell's warning comes at a sensitive moment. Just two weeks after the transition at the head of the Fed, the predecessor of the new chair speaks critically about the political situation. His speech signals that Powell views the independence of the central bank as fundamental to its functioning – and that this independence is currently under pressure.

The former Fed chief thus underscores a classic dilemma of central bank policy: while the Fed is formally independent, it ultimately remains embedded in the political system. Powell's public intervention shows that he sees this balance as endangered and wants to point the new leadership of the central bank to the importance of its autonomy.