Top economist Mohamed El-Erian says Powell should resign to preserve Fed independence

Mohamed El-Erian on Tuesday called for Federal Reserve Chair Jerome Powell to voluntarily relinquish his position in order to ensure the central bank's independence, making the chief economic advisor at Allianz one of the first prominent economists to publicly take such a position.

“If Chair Powell's objective is to safeguard the Fed's operational autonomy (which I deem vital), then he should resign,” El-Erian, , said in a morning post on X.

El-Erian, also president of Queen's College at Cambridge University, said he was aware that his view did not align with what he saw as Wall Street consensus that wants Powell to serve out the remainder of his term as chairman, which ends in May 2026. The former co-chief investment officer at Pimco acknowledged, however, that Powell's resignation would not be a “first best” outcome.

But El-Erian said Powell stepping down would be better than the current scenario, in which he said the Fed is facing “growing and broadening threats” to its independence. El-Erian said these threats would likely only increase if Powell remained Fed chair.

El-Erian referenced Treasury Secretary Scott Bessent's statement that the Fed had suffered from “mission creep” into areas outside of its core monetary policy responsibilities. Bessent told CNBC on Monday that “the entire” Fed should undergo a review.

The statements come as President Donald Trump and his advisers have stepped up their attacks on Powell over the Fed's decision to hold interest rates steady since December. Powell has said that Trump's plan for steep tariffs has created economic uncertainty, pushing the bank to keep rates unchanged as it awaits developments.