El-Erian Says Powell Should Resign—To Save The Fed Itself

Escalating political attacks on the Federal Reserve have prompted economist Mohamed El-Erian to say Fed Chair Jerome Powell should resign—not for missteps, but to actually protect the central bank's independence.

"If Chair Powell's objective is to safeguard the Fed's operational autonomy (which I deem vital), then he should resign," El-Erian wrote on X.

El-Erian, chief economic advisor at Allianz and a closely followed market voice, indicated that this isn't the consensus view, as many believe Powell should remain until his term ends in May 2026.

The economist warned that the longer Powell stays, the more damaging the political fallout could be—not just for Powell himself, but for the Fed's long-standing autonomy.

According to El-Erian, resigning now would be "better than what is playing out"—a rise in threats to Fed independence that will likely escalate if Powell stays.

From Renovations To Resignations: The Political Pressure Mounts

The calls for Powell's resignation have become part of the official government narrative.

On July 9, 2025, President Donald Trump demanded Powell's immediate resignation, calling him "ineffective" in managing monetary policy. That came just one day after reports surfaced of White House frustration over Powell's alleged misrepresentation of the Federal Reserve's $2.5 billion headquarters renovation project.

A week later, Treasury Secretary Scott Bessent confirmed that a "formal process" to replace Powell was underway and added that Powell should step down from the Fed board once his term as chair ends in 2026.

Then came the legal escalation.

On July 21, Rep. Anna Paulina Luna filed a referral to Attorney General Pam Bondi, requesting a Department of Justice criminal investigation into whether Powell made false statements under oath about the renovation’s costs.

Markets Assign Above 20% Chance On Powell’s Exit

Investors aren't ignoring the noise.

On Kalshi, a CFTC-regulated event prediction platform, the odds that Powell will leave his role by December 31, 2025, are not negligible.

A $100 bet on Powell's early exit now pays $412, reflecting a 22% probability he doesn't make it to year-end.

That's down from earlier in July when Trump's attacks first escalated, but still notable given the Fed's traditionally apolitical role.

The upcoming Federal Open Market Committee (FOMC) meeting on July 29-30 now reflects just a 4.7% chance of a rate cut, according to futures markets.

Still, some Fed officials—including Governors Michelle Bowman and Christopher Waller—have recently signaled openness to a cut, setting the stage for what could be one of the most contentious and politically charged Fed meetings in years.

Waller is also seen as a potential successor to Powell, alongside Kevin Warsh, Kevin Hassett, Scott Bessent, and Judy Shelton.

Markets Rush To Hedge With Gold

"As to market reaction," El-Erian added, "most of the frequently mentioned candidates to replace Chair Powell would be able to calm any potential market jitters."

That suggests one of the Fed's key roles—maintaining investor confidence—is at risk of being compromised.

While El-Erian downplays the risk of a sharp market reaction if Powell steps down, investors appear to be positioning for a shake up.

Mounting uncertainty over Powell's future and the Fed's independence has reignited a flight to gold.

The yellow metal—tracked by the SPDR Gold Trust (NYSE:GLD)—has climbed nearly 3% over the past two sessions, putting it on track for its best week since early June.

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Image created using artificial intelligence via Midjourney.