New Survey of Former Federal Reserve Insiders Point to Risks to Independence and Policy Outlook

Conducted by Jon Hilsenrath, a former Wall Street Journal economics writer and Visiting Scholar at Duke University, in partnership with Duke’s Department of Economics, the survey gathers views from former Federal Reserve officials and staff about the economic and outlook for the U.S. central bank.  

With the strong likelihood of persistent inflation and elevated unemployment in the years ahead, former Federal Reserve officials and staff argue that the central bank should proceed with gradual interest rate reductions, according to a new survey. However, they warn that political interference poses a serious risk of causing policy mistakes, potentially leading the Fed to ease too aggressively. Given these concerns, survey participants strongly backed Fed Governor Chris Waller as best qualified to succeed Jerome Powell as chairman, citing his potential independence as an important trait.

Conducted by Jon Hilsenrath, a former Wall Street Journal economics writer and Visiting Scholar at Duke, in partnership with the Duke University Department of Economics, the survey includes insights from 25 former Fed governors, regional bank presidents, and staff members, with responses collected from Sept. 4 to Sept. 11. The survey asked participants to estimate the variables that are filled out in the Fed’s quarterly Summary of Economic Projections and to respond to two special questions relating to Fed independence and central bank leadership.

Former officials projected inflation would remain above the Fed’s 2% target through at least 2027. Inflation is expected to finish 2025 at 3%, with only a handful seeing it decline to 2% by 2027. Unemployment is projected to hover around 4.5% for the next two years.

"President Trump was elected because he was seen by voters as best-suited to drive down inflation,” Hilsenrath said. “The implicit message from our survey of former Fed officials is that if the Fed follows the course of interest rates that he prescribes, the U.S. could experience much more inflation."

Most former officials said the best course is a slow, steady reduction of interest rates toward neutral levels. About half of those surveyed said they expect the Fed to stick with its June projection of two quarter-point rate cuts this year. Eight respondents said two cuts would be appropriate, seven said one cut or none, and seven favored three or more. On average, the group expected two additional cuts in 2026 and approximately one more by 2028, bringing rates gradually toward the Fed’s estimate of neutral near 3%.

Policy Risks and Political Pressure

Twenty-four of the 25 participants described the risk of a policy mistake from political interference as “extreme,” “serious” or “elevated.” Many said the danger lies in the Fed cutting rates too quickly under White House pressure, leading to entrenched inflation. “The Fed will be under a lot of pressure to ease, and even if it doesn’t totally give in, I think there will be an incentive to err on the easy side so as to avoid blame if there is a recession,” one participant said.

Others noted that if the economy weakens significantly, standard Fed policy would call for easing anyway, so what the White House is seeking and what sound policy calls for could be aligned. Still, several warned that attempts to remove Fed governors or regional presidents could directly undermine the central bank’s independence.

Sample remarks from survey participants illustrate the range of concerns:

• “There’s a reasonable chance that policy will have to be as dovish as the White House could imagine.”
• “While political pressure might cause the FOMC to lean lower than it otherwise might, inflation pressure will pull in the other direction. In the end, the FOMC will protect its credibility. However, acting independently might be personally costly to some members. If Trump gains the authority to fire those who disagree, Fed independence will be lost.”
• “It’s possible that a quicker-than-expected easing might boost financial markets in the short run, but could damage the Fed’s independence and may forgo their fight on inflation. This could reverse financial market euphoria and have the opposite impact on long-term interest rates due to inflation expectations rising, and perhaps a lessening of foreign interest in US Treasury securities as central bank credibility becomes impaired.”

Succession Outlook

With Jerome Powell’s term as chairman ending next year, survey participants strongly favored Governor Chris Waller as his successor. Twenty-one respondents named Waller as best suited for the role, compared with three for former Governor Kevin Warsh and one for Treasury Secretary Scott Bessent. None supported White House economic adviser Kevin Hassett.

Waller, a Fed governor since 2020, was seen as knowledgeable, experienced, and most likely to make independent judgments on monetary policy. Several participants, however, expressed skepticism that Waller would be chosen because of his perceived independence from the administration.

"Chris Waller is far and away the favored choice among former Fed officials for the top job when Jay Powell's term ends next year,” Hilsenrath said. “This support from central bankers might not help Waller inside the White House, but it is probably a good approximation of the market's preference, too. To the extent the White House cares about market reactions to Powell's successor, officials might want to bear that in mind."

View the complete September survey report for more details and commentary from participants.

This survey is conducted leading up to the March, June, September, and December meetings of the Federal Open Market Committee, with results released several days before each meeting. Former officials and staff are granted anonymity to encourage candid participation. Interested in receiving future releases from the survey? Join the mailing list.