Forget the drama about whether Trump fires Powell. That’s the sideshow. The real risk to markets is what happens if the Federal Reserve itself gets cracked open and reworked.
That’s the conversation no one wants to have, but it’s happening now… loudly. This isn’t just about one guy at the top. It’s about the entire machine behind him.
Scott Bessent, the U.S. Treasury Secretary, made that clear Monday. Speaking to CNBC, Scott said the Fed’s recent performance deserves a top-to-bottom review. He attacked what he called their “fear-mongering over tariffs,” even though there’s been no real inflation spike.
“What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” he said. “All these PhDs over there, I don’t know what they do.”
Trump allies ramp up pressure on the Fed
This isn’t some rogue rant. It’s part of a broader offensive from the Trump administration. While Trump has been hammering Powell for not cutting rates fast enough, Scott’s comments added a new layer.
And the timing couldn’t be more deliberate. Markets have been rattled for weeks over speculation that Trump might fire Powell, something legally tricky but politically explosive.
But here’s the thing: Powell alone doesn’t run the Fed. He’s one vote. The rate-setting body, the Federal Open Market Committee (FOMC), is made up of twelve people, seven board members and five regional Fed presidents.
Each year, the committee picks its own chair and vice chair. By tradition, the Fed Chair holds that position. But that’s not mandatory. If the rest of the FOMC wanted to block a politically charged appointment, they technically could.
This system was built for moments like this, to shield monetary policy from political pressure. But even with that structure in place, the risk now is that the Fed itself may be forced to change the way it operates or evaluates economic conditions.
And that’s where the real volatility lives, not in the headline “Powell fired,” but in the backroom rewrites of how the most powerful central bank in the world actually works.
Economists call for Powell to quit before damage gets worse
Meanwhile, someone outside politics has stepped into the mess. Mohamed El-Erian, chief economic advisor at Allianz and a respected voice on global markets, posted on X Tuesday morning that Powell should resign, voluntarily.
Not because he’s doing a bad job, but because staying might do more harm than good. “If Chair Powell’s objective is to safeguard the Fed’s operational autonomy (which I deem vital), then he should resign,” he wrote.
El-Erian is also president of Queen’s College at Cambridge University. He knows what this would mean. His view cuts against the Wall Street consensus, which has been expecting Powell to serve out the rest of his term until May 2026. El-Erian admitted it’s not the “first best” option, but he said the alternative is worse.
The threats to the Fed’s independence, in his view, are “growing and broadening,” and keeping Powell in place might just escalate the attacks.
He also echoed Scott’s criticism. According to El-Erian, the Fed has experienced “mission creep.” That’s bureaucratic speak for straying from your lane. The Fed was designed to manage inflation and employment, not inject opinions about trade tariffs or other political fights.
Scott said Monday, again on CNBC, that “the entire” institution needed to be reviewed, not just one man at the top. These are coordinated signals.
You’ve got the Treasury Secretary questioning the usefulness of Fed PhDs. You’ve got a high-profile economist saying the Chair should walk to protect the Fed itself. And you’ve got an administration openly threatening a full teardown of how the central bank works.
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