The campaign to remove US Federal Reserve Chair Jerome Powell is gathering momentum, but according to economist Dr Komal Sri-Kumar, it is being fought on the wrong battlefield. Blaming Powell for cost overruns in a construction project, or for not cutting rates pre-emptively, distracts from the real issues that deserve scrutiny. Worse, such political theatre may leave lasting scars on institutional credibility.
“The recent wave of criticism targeting Powell has too often ignored the line between legitimate accountability and opportunistic blame,” Sri-Kumar writes in his SriKonomics newsletter. The $800 million blowout in the renovation budget for the Federal Reserve’s Washington headquarters has been weaponised by the President, Treasury Secretary Scott Bessent, and National Economic Council Director Kevin Hassett, despite no evidence of wrongdoing or misappropriation. It is, says Sri-Kumar, a “convenient scapegoat—but a misplaced one.”
If cost blowouts are grounds for dismissal, then the current administration would also stand guilty. The passage of the Big Beautiful Bill has lifted the U.S. debt trajectory by trillions. Bond yields have risen, the dollar has weakened and inflation remains sticky. All of these have real economic costs. The Fed cannot be blamed for all of them.
Still, Sri-Kumar has never hesitated to criticise Powell—but he prefers to target what matters.
He points back to 2020, when the Fed joined forces with Congress to unleash a combined monetary-fiscal wave that supercharged demand and ignited inflation. At the time, Powell called it “transitory.” That call was, in Sri-Kumar’s view, a serious error in judgement.
“The combination of massive fiscal and monetary stimulus would result not in fleeting inflation but sustained price pressure. It did,” he writes. And the Fed’s eventual tightening, delayed by that initial misread, had to be sharper and more painful.
The motivations, he suggests, may not have been entirely technocratic. Powell, having endured a rocky relationship with Trump in his first term, might have sought political survival under a second Biden term. A booming post-pandemic economy would have boosted Biden’s re-election chances and kept Powell in the Chair beyond 2026.
This possibility is matched by a second concern: that Powell simply misunderstood the transmission of inflation through the monetary system—a failure more damning than political calculation.
And the political timing of recent moves has done little to quieten doubts. In September 2024, with just weeks to go before the U.S. election, the Fed cut rates by 50 basis points, declaring that inflation had been tamed. But core prices remained stubborn. Sri-Kumar called it out at the time as a move that conveniently supported the Democratic candidate.
Even worse, the Fed has begun to wander into areas far beyond its original remit. In May 2025, Vice Chair Michael Barr mused about confronting climate change. “What’s next?” Sri-Kumar asks. “Regulating dietary guidelines?” The Fed’s strength lies in its narrow focus, he argues. Expanding its mission risks diluting its credibility.
Yet not every attack on Powell is warranted. Trump has accused the Chair of failing to pre-empt the inflationary impact of his own tariff regime. But Sri-Kumar calls this unfair. “Given the deteriorated relationship with Trump, there is near-universal consensus that he will not be renominated. In this context, Powell’s decision to wait and see… is not only appropriate, it is responsible.”
Rather than fixating on Powell’s role in office renovations, the real concern, according to Sri-Kumar, should be the trajectory of inflation, the dollar and bond yields. Tariffs, he says, will raise inflation, not just briefly but in a sustained manner. Fed Governor Christopher Waller’s suggestion that it will be a one-off price shock is misguided, he warns. More tightening may still be required.
“The impact of tariffs will be an acceleration of inflation contrary to what the Presidential team has maintained,” he writes. “We are not done yet with a rise in long-dated Treasury yields, a falling dollar and rising price of gold.”
Amid this, politicising the Fed is a costly distraction. Institutional erosion doesn’t lower yields—it raises them. And if Powell is forced out for the wrong reasons, the cost won’t stop at the Fed’s doors.
Disclaimer: Quotes in this article are sourced from SriKonomics, the weekly newsletter published by Dr Komal Sri-Kumar, President of Sri-Kumar Global Strategies, Inc.
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