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Egyptian-American economist Mohamed El-Erian calls for Fed chairman's resignation

Egyptian-American economist Mohamed El-Erian calls for Fed chairman's resignation

The National3 days ago
Egyptian-American economist Mohamed El-Erian broke ranks on Tuesday by suggesting Jerome Powell should resign as the chairman of the US Federal Reserve.
'By staying in office, is Powell defending independence or is he exposing it to greater threats?' he said, when asked by The National during a conference co-hosted by the World Bank and Centre for Global Development in Washington.
'If you see what has happened over the past few weeks is that the attacks have evolved from simply being attacks on him personally to being attacks on the institution.'
The White House has increased its pressure on the Fed to cut interest rates this year, with Mr Trump calling for low rates to help service the nation's debt, a concept known as fiscal dominance.
The Fed has paused its interest rate cuts after reducing policy in the final months of 2024, owing to uncertainty surrounding President Donald Trump's tariffs policies. The extended pause has drawn the increasing ire of the White House.
The administration's latest line of attack has been on continuing renovations at the Fed's headquarters in Washington, where costs have risen to $2.5 billion. Trump officials have accused Mr Powell of grossly mismanaging the Fed, citing the renovation, which some see as grounds for a sacking.
Mr Powell has linked cost overruns to unforeseen conditions such as more asbestos than anticipated, contamination in the soil and a higher-than-expected water table.
'This tension between the President and the chairman of the Fed, if it continues, it will suck in more elements of the Fed,' Mr El-Erian said.
Mr Powell has said that he intends to serve out his term as chairman, which expires in May 2026, and that Mr Trump has no legal authority to fire him.
Tensions simmered last week following reports that Mr Trump indicated to Republicans in the House of Representatives that he was open to firing Mr Powell. While Mr Trump confirmed he brought up the idea, he said it was 'highly unlikely' that he will sack the chairman.
The reports led to a brief spike in long-term yields and a weakening in the US dollar before they pared back some losses after Mr Trump's comments.
Those reported as possible replacements for the Fed chairman include National Economic Council head Kevin Hassett, former Fed governor Kevin Warsh, Treasury Secretary Scott Bessent and current Fed Governor Christopher Waller.
Mr El-Erian said the reported list of candidates would help calm market jitters.
'It's a very controversial argument, but it is underpinned by the need to maintain the critical importance of central banking,' he said.
In an interview with Fox Business earlier on Tuesday, Mr Bessent said Mr Powell should not resign.
'There's nothing that tells me that he should step down right now,' he said. 'His term ends in May. If he wants to see that through, I think he should. If he wants to leave early, I think he should.'
Mr Bessent on Monday had called for the 'entire review' of the Federal Reserve system's non-monetary policy operations. He also called for a review into the Fed's building renovations.
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