Bank of America Chairman and CEO Brian Moynihan delivered a pointed warning Sunday about the consequences of politicizing the Federal Reserve, saying that financial markets will "punish" any erosion of the central bank's independence. The comments come as the Trump administration prepares to nominate a successor to Fed Chair Jerome Powell, whose term expires in May 2026.

The Warning

Speaking on CBS News' "Face the Nation," Moynihan was unequivocal about the market implications of compromising Fed independence.

"The market will punish people if we don't have an independent Fed. And everybody knows that."

— Brian Moynihan, Bank of America CEO

Moynihan's comments reflect concerns among financial leaders that the incoming administration may seek to exert greater influence over monetary policy. President Trump has repeatedly expressed displeasure with Powell, particularly over interest rate decisions, though there is no legal precedent allowing the president to fire a Fed chair except "for cause."

Too Much Focus on the Fed?

While defending the Fed's independence, Moynihan also suggested that markets have become overly fixated on central bank policy. He noted that the private sector—small, medium, and large businesses as well as entrepreneurs—drives the economy, not the Fed.

"The idea that we are, like, hanging on the thread by the Fed moving rates 25 basis points, it seems to me we've gotten out of whack."

— Brian Moynihan

The Bank of America chief acknowledged that the Fed plays a critical role as the lender of last resort during times of extreme stress, citing both the 2008 financial crisis and the COVID-19 pandemic as examples. But he suggested that in normal times, the central bank should operate quietly in the background—"you shouldn't know they exist, quite frankly."

The Independence Question

The Federal Reserve's independence from political interference has been a cornerstone of U.S. monetary policy since the central bank was restructured in the aftermath of the Great Depression. The principle holds that allowing elected officials to control interest rates would lead to short-term political considerations overriding sound economic policy.

Historical evidence supports this view. Countries where central banks lack independence have generally experienced higher inflation and greater economic volatility. Conversely, independent central banks have proven more effective at maintaining price stability and anchoring inflation expectations.

The Powell Succession

Powell, a Republican first appointed by President Trump in 2017 and reappointed by President Biden in 2022, has navigated an extraordinarily challenging period that included the pandemic-era monetary expansion and the subsequent aggressive rate hikes to combat inflation. His term as chair expires in May 2026, though his term as a Fed governor extends until 2028.

Moynihan said Trump has "great candidates" to consider for the position, though he declined to name specific individuals. The selection will be closely watched by markets, as any perception that the new chair will be less independent could trigger significant volatility in both bond and equity markets.

Treasury's View

Treasury Secretary Scott Bessent has advocated for a "backseat" Federal Reserve, suggesting the administration favors a less interventionist approach to monetary policy. Some Fed observers interpret this as a signal that the White House wants a more passive central bank that will be less likely to raise rates aggressively—even if inflation proves sticky.

Market Implications

Moynihan's warning carries weight given Bank of America's position as one of the world's largest financial institutions. The bank's view of Fed independence likely reflects the perspective of major institutional investors who would be most directly affected by any perceived politicization of monetary policy.

For investors, the key takeaway is that Fed independence remains a market-moving issue. Any concrete signals that the incoming Fed chair will face pressure to subordinate monetary policy to political considerations could trigger:

  • Higher bond yields: As investors demand compensation for increased inflation risk.
  • Dollar weakness: As confidence in U.S. monetary discipline erodes.
  • Equity volatility: As uncertainty about the policy outlook increases.

As 2026 approaches, the Fed succession will move from a background concern to a front-burner market issue. How the administration navigates this transition—and whether it can reassure markets about the Fed's continued independence—could significantly influence asset prices in the months ahead.