Fed to Cut Workforce by 10% Over Coming Years, Powell Says

• The Federal Reserve plans to cut its workforce by 10%, reducing its 24,000 employees to below 22,000, through measures like a voluntary deferred resignation program for staff eligible to retire by the end of 2027, as announced by Chair Jerome Powell in a memo.
• Powell directed Fed leaders to consolidate functions and modernize practices to align with evolving priorities, responding to efficiency pressures but not explicitly citing Elon Musk’s criticism or the Trump administration’s cost-cutting push led by the Department of Government Efficiency.

The Federal Reserve, under Chair Jerome Powell, plans to reduce its workforce by 10%, targeting a headcount below 22,000 from its 2023 reported 24,000 employees, through measures including a voluntary deferred resignation program for staff eligible to retire by the end of 2027. Powell, in a memo obtained by CNBC, emphasized the need for periodic staffing reviews to align with evolving priorities and ensure the Fed meets its statutory mission, directing leaders to consolidate functions and modernize business practices. The initiative reflects a proactive response to external pressures for efficiency, though Powell’s memo does not explicitly reference the Trump administration’s cost-cutting agenda or comments from Elon Musk, who has criticized the Fed as “absurdly overstaffed.”

The Fed is absurdly overstaffed https://t.co/9qoPO8fsiM

— Elon Musk (@elonmusk) March 3, 2025

The planned reduction aligns with broader trends in organizational streamlining, as central banks globally face scrutiny over operational costs amid complex economic challenges. The Fed’s workforce, which supports monetary policy, financial regulation, and economic research, has grown in recent years to address heightened demands, such as post-pandemic recovery and digital currency exploration. A 10% cut, while significant, is designed to maintain core functions, with the deferred resignation program targeting older employees to minimize disruption. Powell’s focus on modernization suggests investments in automation and data analytics to enhance efficiency, a strategy mirrored by institutions like the European Central Bank, which have also pursued digital transformation to reduce administrative overhead.

The absence of direct mention of Musk or the Department of Government Efficiency in Powell’s memo underscores the Fed’s independence, yet the timing suggests an awareness of political and public expectations for leaner government operations. The voluntary program, set to unfold over the next couple of years, provides a gradual approach to downsizing, potentially mitigating backlash from labor groups. However, reducing staff by nearly 2,000 could strain certain functions, particularly in regional banks where specialized roles are critical. As the Fed navigates this transition, its ability to balance efficiency with its mandate to stabilize prices and maximize employment will be closely watched, especially under the incoming administration’s fiscal scrutiny.

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