Jerome Powell should resign, top economist Mohamed El-Erian says, citing a scandal Trump hasn’t even mentioned

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El-Erian’s comments, issued via social media and elaborated in press interviews, are remarkable not only for their candor, but for their counterintuitive reasoning: El-Erian believes Powell should step aside to protect the institution’s independence in the face of multiplying political attacks. Most financial leaders who are insisting that Powell resist the pressure he’s facing from Trump are the exact opposite, citing central bank independence as the reason Powell must stay.As the White House has ratcheted up its criticism of Powell, speculation has grown about potential leadership changes at the Federal Reserve. Donald Trump has been outspoken in his demands that Powell cut interest rates, a concern that El-Erian shares. But the scandal advanced by the Trump administration over Powell’s oversight of a $2.5 billion office renovation is not part of El-Erian’s critique.El-Erian, who has been an inflation hawk for nearly all of the 2020s, largely agrees with the White House on inflation, even if they may be coming at it from different angles. Trump likely wants rate cuts as a way to spur the economy ahead of the 2026 elections, although Trump demanded rate cuts in similar fashion in the last decade, when both he and Powell were in their first terms. The cuts that eventually resulted surprised economists as inflation stayed under control for a time—but the surge in 2021 was the biggest since the early 1980s.El-Erian was on the record then and now about saying that Powell undermined the Fed’s credibility on inflation throughout this episode. On Tuesday, he stated that if Powell were a CEO in the corporate world, he would have already been forced out over the central bank’s recent stumbles. Among the missteps: the Fed’s much-derided assertion in 2021–2022 that inflation was “transitory,” which delayed rate hikes and contributed to price spikes; the 2022 “insider trading” scandal involving several senior Fed officials; and the 2023 banking crisis around the collapse of Silicon Valley Bank, which prompted what El-Erian termed a “damning” internal report.In the first regard, El-Erian was often critical of Powell’s reference to “transitory” inflation, calling it a “protracted gross mischaracterisation” in a December 2022 op-ed for the Financial Times. At that time, Powell was awaiting an Inspector General report on stock trading during the pandemic by two central bank governors. They were ultimately cleared, but the watchdog chastised both of them—and indirectly Powell—for undermining public confidence in the central bank, the same topic with whic El-Erian is still concerned. Although Powell was never accused of wrongdoing regarding the trading controversy, the episode led to stricter rules for central bank leaders and further eroded public confidence. Finally, the collapse in Silicon Valley Bank was unrelated, but chief regulator Michael Barr criticized lax oversight in an April 2023 report, arguing that it was partially responsible for one of the biggest banking failures in American history.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P Futures6,404.25 +8.00 (+0.13%)Dow Futures45,109.00 -105.00 (-0.23%)Nasdaq Futures23,404.50 +93.75 (+0.40%)Russell 2000 Futures2,289.80 -5.00 (-0.22%)VIX15.37 -1.13 (-6.85%)Gold3,394.40 -3.20 (-0.09%)PortfolioSign in to access your portfolioSign inTop gainersABVX ABIVAX Société Anonyme 68.60 +58.60 (+586.00%)LBRT Liberty Energy Inc. 13.25 +2.00 (+17.78%)VICR Vicor Corporation 52.68 +7.48 (+16.55%)LW Lamb Weston Holdings, Inc. 57.19 +8.02 (+16.31%)HIMS Hims & Hers Health, Inc. 58.02 +8.01 (+16.02%)Top losersENPH Enphase Energy, Inc. 36.48 -6.02 (-14.16%)FI Fiserv, Inc. 143.00 -22.98 (-13.85%)TXN Texas Instruments Incorporated 186.25 -28.67 (-13.34%)OTIS Otis Worldwide Corporation 88.49 -12.50 (-12.38%)MARA MARA Holdings, Inc. 17.57 -2.31 (-11.62%)Most activeLCID Lucid Group, Inc. 3.0800 -0.0500 (-1.60%)NVDA NVIDIA Corporation 170.78 +3.75 (+2.25%)MARA MARA Holdings, Inc. 17.57 -2.31 (-11.62%)NIO NIO Inc. 4.9200 -0.0900 (-1.80%)WBD Warner Bros. 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