Former Federal Reserve Chair Jerome Powell warned that the U.S. central bank is undergoing a significant "stress test," cautioning that the institution's credibility could be damaged if political leaders gain greater influence over monetary policy decisions.
Speaking after accepting the John F. Kennedy Profile in Courage Award, Powell defended the Federal Reserve's longstanding independence and argued that insulating interest-rate decisions from political pressure remains essential to maintaining public confidence in the nation's financial system.
"Like many other institutions, the Fed has been undergoing a stress test," Powell said during his remarks.
Powell's comments come as President Donald Trump continues pressing the Federal Reserve to lower interest rates in an effort to stimulate economic growth. The administration has repeatedly criticized the central bank's approach to monetary policy, intensifying a debate over the proper relationship between elected officials and the Fed.
Addressing the issue directly, Powell said, "Congress wisely chose to insulate monetary policy decisions from political pressure." He added that "These protections have served the public well, and administrations from both parties have respected them."
The former Fed chair warned that allowing policymakers to remove Federal Reserve officials because of disagreements over interest-rate policy could create a dangerous precedent. "If an administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well," Powell said.
According to Powell, the consequences would extend beyond any single administration. "The public would lose faith that the central bank will make decisions based only on what's best for all Americans," he said. He later emphasized the importance of preserving institutional trust, stating that "the Fed's credibility would be lost" if political interference became normalized.
"That credibility enables the Fed to support a strong and stable economy for the benefit of American families and businesses," Powell said. "Our credibility has been built and sustained over many decades, and we have a duty to safeguard that priceless asset for our fellow citizens and for generations to come."
Powell also stressed that the central bank's responsibility is to make decisions based on economic evidence rather than political considerations. "What the public has every right to expect is that we will make our decisions based only on our best economic analysis of what would most benefit the people we serve," he said.
