CEOs Rally Behind Fed Independence as Trump Pressures Powell

President Donald Trump has been sharply critical of the Federal Reserve’s policy decisions. (Michael M. Santiago/Getty Images)

American corporations rarely weigh in on central-bank governance. But with President Donald Trump intensifying his criticism of the Federal Reserve and scrutiny of its policymakers, the heads of some of the nation’s largest financial institutions have been stepping forward to defend the Fed’s independence, a principle many see as fundamental to U.S. economic credibility.

Trump has long criticized Federal Reserve Chair Jerome Powell for not lowering interest rates, but last week he escalated his rhetoric. The president said on Tuesday that he would soon have a majority of his nominees on the Federal Reserve Board of Governors, who will work to slash interest rates. “We’ll have a majority very shortly,” Trump said during a televised cabinet meeting. “So that’ll be great.”

His comments came following his move late Monday to fire Federal Reserve Gov. Lisa Cook over allegations of mortgage fraud, an action that is being contested in the courts.

The latest and perhaps most forceful voice in defense of Fed independence from political interference belongs to Citadel’s Ken Griffin, who told Barron’s recently that while Trump “can score political points by attacking [Federal Reserve Chair] Jay Powell, ultimately the independence of the Fed is of the utmost importance to the American and global economy.”

He is hardly alone. JPMorgan Chase CEO Jamie Dimon used his bank’s latest earnings call to declare that Fed independence is “absolutely critical” under any chair, warning that political interference “can often have adverse consequences.”

Citigroup CEO Jane Fraser stressed its global importance, saying in a July statement that the Fed’s credibility “is critical to the effectiveness of our capital markets and U.S. competitiveness.”

Goldman Sachs chief David Solomon called central-bank independence “super important” and said on CNBC in July that it was something “we should fight to preserve.” And Bank of America’s Brian Moynihan told Bloomberg that the Fed was designed to be “set up to be independent.”

Such statements may read as boilerplate, but they represent an unusual show of corporate solidarity. Jeffrey Sonnenfeld, a professor at Yale University’s School of Management, noted that many CEOs have been reluctant to risk Trump’s ire, given the president’s history of singling out companies for attack. “Some of the greatest firms have become easy targets,” he said.

Speaking out now, he added, is “an act of considerable corporate courage.”

The stakes go beyond politics. Fed independence underpins trust in the U.S. dollar as the world’s reserve currency and supports the deep, liquid capital markets that are the backbone of American economic power, he said. “We’re the global beacon that we are very much because of the nonpolitical luster and reputation of the Fed,” said Sonnenfeld.

Support of Fed independence doesn’t mean the central bank should be free from criticism, however. Some critics say the Fed has overreached its dual mandate of full employment and stable prices by stepping into issues such as climate-change preparedness; others point to the Fed’s tardy response to a surge in inflation after the onset of the Covid pandemic, and what they perceive as other missteps.

Mohamed El-Erian, chief economic advisor at Allianz, defended Fed autonomy but has said Powell should step aside. “If Chair Powell’s objective is to safeguard the Fed’s operational autonomy (which I deem vital), then he should resign,” El-Erian posted on social media in July.

By not resigning, he said, Powell was inviting further scrutiny of the Fed**.**

Whether an emerging corporate front will shape the political debate about the Fed’s future is unclear. But with Trump’s attacks mounting and Powell’s term slated to end next May, the willingness of CEOs to speak up underscores the gravity of the moment.

The Federal Reserve declined to comment for this article. The White House didn’t immediately respond to questions about central-bank independence.

Write to Nicole Goodkind at nicole.goodkind@barrons.com.