Jerome Powell warns that the Fed's credibility is at risk

In his first public remarks since the conclusion of his time as Federal Reserve chair, Jerome Powell has issued a blunt warning that the central bank is undergoing a "stress test" and its credibility is on the line.

The big picture: While Powell's remarks Sunday evening, in accepting the John F. Kennedy "Profiles in Courage" award, do not mention the Trump administration's attempts to undermine Fed independence specifically, the meaning of his words is plain.

• Those include a criminal investigation of the Fed's over-budget building renovation and the attempted firing of governor Lisa Cook.
• Powell framed attempts to weaken the Fed's independence from politics as endangering an institution that is crucial in sustaining American greatness.

State of play: Powell's term as Fed chair ended May 15, but he is remaining in place indefinitely as one of seven Fed governors pending resolution of the president's threats to Fed independence, denying President Trump a vacancy on the powerful board.

• He has said he will keep a low profile in his new role as an ex-chairman serving the Fed board, a situation not seen in 75 years.

What they're saying: "Like many other institutions, the Fed has been undergoing a stress test," Powell said, according to a prepared text to be delivered at the John F. Kennedy Presidential Library and Museum in Boston.

• "Congress wisely chose to insulate monetary policy decisions from political pressure," Powell said. "These protections have served the public well, and administrations from both parties have respected them."
• "If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well. The public would lose faith that the central bank will make decisions based only on what's best for all Americans."
• "The Fed's credibility would be lost. That credibility enables the Fed to support a strong and stable economy for the benefit of American families and businesses. Our credibility has been built and sustained over many decades, and we have a duty to safeguard that priceless asset for our fellow citizens and for generations to come."

Zoom out: "At the Fed, we are, of course, human and thus imperfect," Powell said. "When we make mistakes, we acknowledge them and change course.

• "What the public has every right to expect is that we will make our decisions based only on our best economic analysis of what would most benefit the people we serve."
• "We do not take into account the fortunes of any political party or politician in making those decisions," he said.

Of note: Kevin Warsh, who was sworn in as Fed chair on May 22, has been sharply critical of the Fed's stewardship in recent years and seeks a deep structural overhaul.

• Powell specifically commended the Fed's career staff, calling them "a truly extraordinary group of committed public servants who serve all Americans."

The bottom line: "The work to preserve and strengthen our own democracy can be noisy, frustrating, and, at times, embattled," he said.

• "Partisan political differences are normal—indeed essential—in a thriving democracy. But we ought to be united in our commitment to the higher principles that define our nation. Chief among them is respect for the rule of law."
• "It is essential that we preserve what is good about these institutions, even as we strive to improve them. While we will have political differences, at the end of the day, we all love this wonderful country and want what is best for it and for our fellow Americans," Powell said.