As Jerome Powell approaches the end of his term as chair of the US Federal Reserve in May 2026, the central bank’s standing is lower – and its vulnerability greater – than it has been in decades.
This institutional deterioration is obvious to anyone who looks closely. Even putting aside the heightened risk of the Fed losing its political independence, one cannot ignore the mounting challenges to its dual mandate of price stability and maximum employment. But with his term running out, Powell should not just lament on the circumstances that have undermined the standing of the world’s most important central bank. Instead, he should focus on doing whatever it takes to improve the situation for his successor.
To see how bad things have become for the Fed, one need only read the recent Wall Street Journal commentary by Treasury Secretary Scott Bessent, widely regarded as Powell’s closest ally in the Trump administration. After listing many ways that the Fed has erred, Bessent calls for “an honest, independent, non-partisan review of the entire institution, including monetary policy, regulation, communication, staffing, and research.” That’s quite a list. He then used social media to step up his criticism, blaming the Fed for fueling inequality, and calling on it to cut interest rates.
These are noteworthy and consequential remarks. Not only do they come from a sitting Treasury secretary, but they also allege a broad range of inadequacies and failures at the country’s premier financial institution. Nor is Bessent alone in his dour assessment. A growing number of politicians and officials, not all of them firm supporters of President Donald Trump (but including the leading candidates to replace Powell), are joining the chorus calling for Fed reforms.
Reforms are indeed necessary, and for the good of the US and global economy, they should not be postponed until there is a change of leadership. Powell should respond to the reform chorus now, even if he can do little to correct major policy failures in the short term.
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