Federal Reserve Governor Jerome Powell issued a warning on Sunday regarding the consequences of politicizing the U.S. central bank, while broadly advocating for the defense of democratic institutions. This marked his first public address since concluding his eight-year tenure as Fed Chair.
Powell stated, "Democratic institutions are built over a long time, with immense effort and patience, yet they can be destroyed quickly."
"We must preserve what is good in these institutions while striving to improve them," Powell added, listing the Federal Reserve, the courts, and universities as core institutions underpinning America's success and its international standing.
"Like many other institutions, the Federal Reserve is undergoing a stress test," Powell noted. For the Fed, this includes events such as former President Donald Trump's attempts to dismiss Fed Governor Lisa Cook, demands for Powell's resignation, and the initiation of a criminal investigation into Powell.
Powell's term as Chair officially ended on May 15, with his successor, Kevin Warsh, sworn in on May 22. Powell decided to remain as a Fed Governor, partly due to his belief that the Fed's independence continues to face persistent threats. This decision effectively, for the time being, prevented Trump from appointing new members to the Federal Reserve Board.
Powell emphasized that the Fed's structure is designed to allow it to formulate monetary policy free from political influence, stating, "These protections have served the public well and have been respected by successive administrations of both parties." "If one administration can remove a Fed official over policy disagreements, future administrations will follow suit. The public would then lose confidence that the central bank acts solely based on the best interests of all Americans."
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