El-Erian urges Powell's resignation to buffer Fed independence

Economist Mohamed El-Erian suggested that Federal Reserve Chairman Jerome Powell’s voluntarily resignation could be strategic in protecting the US central bank's operational autonomy amid mounting pressure from the White House.

In a post on X platform today, July 22, El-Erian, who is also Chief Economic Advisor at Allianz and former CEO of PIMCO, wrote, “If Chair Powell’s objective is to safeguard the Fed’s operational autonomy (which I deem vital), then he should resign.”

Powell’s resignation would be better than the current scenario, in which he said the Fed is facing “growing and broadening threats” to its independence; and these caveats would only heighten further if Powell remained Fed Chair, he pointed out.

While acknowledging that this view diverges from the prevailing Wall Street consensus — which favors Powell serving out the remainder of his term through May 2026, El-Erian believes that Powell stepping down would not be a “first best” outcome.

Talks over the Fed's long-standing autonomy took center stage as US President Donald Trump ramped up his criticism against Powell and the Fed's policy of keeping rates unchanged in the recent period. El-Erian sees Powell's exit could stop Trump's attacks on current policymaking and calm markets with a new chairman.

He further stated, “As to market reaction, most of the frequently mentioned candidates to replace Chair Powell would be able to calm any potential market jitters.”