Lay off 10%! Avoid DOGE intervention. The Fed takes the lead in "self-cutting".

To avoid DOGE intervention, Powell took the initiative to announce plans to cut staff by 10% over the next few years. According to reports, Federal Reserve Chairman Powell stated in a memo sent to employees on Friday, May 16th, that "over the next few years, our overall staff numbers will be reduced by approximately 10%", covering the entire Federal Reserve system, including the Washington DC headquarters and the 12 regional Fed banks nationwide. This move is seen by analysts as a preemptive strike by Powell to preempt any potential interference from the Trump administration in the efficiency of the Federal Reserve, demonstrating his political acumen in the policy landscape. Gregory Daco, Chief Economist at EY Parthenon, pointed out: "From the words, it is apparent that Powell seems to be trying to prevent any type of government interference in the Federal Reserve by gradually increasing efficiency and reducing the number of board members, thus fundamentally avoiding mandatory layoffs that would disrupt the Fed's operation." Gregory Daco also stated that Friday's decision is expected to allow the Federal Reserve to incrementally increase efficiency and maintain control over the entire process. The Federal Reserve's plan further showcases Powell's skill in navigating the policy landscape in a complex environment. Powell takes proactive measures, launching a multi-year plan for staff reduction Powell stated that the staff reduction will mainly be achieved through natural attrition, meaning that the Federal Reserve will gradually reduce its overall workforce, with no strict deadlines set. Currently, the Federal Reserve has implemented a hiring freeze and plans to achieve the staff reduction goal through normal turnover and retirements. Powell stated in the memo: "I have instructed the leadership of the Federal Reserve, including the board and the entire system, to gradually integrate functions where appropriate, modernize business processes, and ensure our organization is appropriately sized to fulfill our statutory mission." The staff reduction plan also includes offering voluntary early retirement packages to some employees. Powell stated that this measure is similar to a plan implemented by the Federal Reserve in 1997. Powell stated that the Federal Reserve reduced staff during the Clinton administration in 1997, "each time, we were able to gradually streamline operations over time, reflecting the current situation while remaining steadfastly focused on fulfilling our public mission. I believe it is time to do so again with the same seriousness and thoughtfulness." Furthermore, the early retirement package is open to board members who are fully eligible for retirement by December 31, 2027. According to the Federal Reserve's 2023 annual report, its total staff count is 23,950; the 2024 budget estimates an increase in staff numbers to 24,553, about a 2.5% growth. This means that a 10% staff reduction will reduce nearly 2,500 people, bringing the Federal Reserve's staff count to a level close to that of ten years ago. Since 2010, the Federal Reserve's staff count has significantly increased, while the staff count of other large federal agencies in the United States has decreased by 10%. Powell's political wisdom: avoiding external interference The Federal Reserve's staff reduction measures come at a time when the Trump administration is pushing for staff reductions and streamlining operations at various federal agencies in the United States. Although the Federal Reserve is an independent organization that does not rely on congressional appropriations, it still faces criticism for its staff size and building renovation costs. The head of the Department of Government Efficiency (DOGE), Musk, has criticized the Federal Reserve for having too many staff and for the high cost of renovating the headquarters building. Musk earlier this month called the cost of the project "staggering". By 2022, the related costs of renovating the Federal Reserve headquarters building have ballooned to approximately $2.5 billion, which the Federal Reserve attributes to a significant increase in building materials and labor costs since the project started in 2021, coinciding with a surge in inflation at the time. In a congressional hearing in February, Powell refuted claims of excessive staff at the Federal Reserve. He said, "The Federal Reserve may have a heavy workload, but it is not overstaffed. Every employee at the Federal Reserve works very hard." This article is translated from "Wall Street Seen"; GMTEight Editor: Li Fo.