Federal Reserve Plans 10% Staff Reduction Nationwide/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Federal Reserve will reduce staff by 10% over time through attrition and voluntary retirements. Chair Jerome Powell cited the need for efficiency and modernization, aligning with broader federal efforts to streamline government operations.
Fed Workforce Reduction: Quick Looks
- 10% staff cut to be phased in through attrition, not layoffs.
- Affects 24,000 employees across the Federal Reserve Board and 12 regional banks.
- Fed Chair Jerome Powell emphasizes modernization and efficiency.
- Move aligns with broader government efforts to cut bureaucracy.
- Voluntary deferred resignations offered for retirement-eligible staff, echoing a 1997 program.
- Fed remains independent, but seeks to reflect national cost-conscious trends.
Deep Look: Federal Reserve Targets 10% Workforce Reduction for Modernization, Efficiency
WASHINGTON — The Federal Reserve System plans to reduce its workforce by 10% in the coming years, Fed Chair Jerome Powell told employees in an internal memo Friday. The downsizing, which will rely primarily on attrition and voluntary retirement, is the most significant staffing move by the central bank in over two decades.
The Fed, which operates independently of the executive branch, is nonetheless acting in the context of increased pressure in Washington to shrink government bureaucracy. The Trump administration has championed agency reform and cutbacks as part of its anti-bureaucracy agenda — a trend now rippling into semi-autonomous institutions like the Fed.
What the Fed Said
“I have directed the leadership of the Federal Reserve… to find incremental ways to consolidate functions where appropriate, modernize some business practices and ensure that we are right-sized and able to meet our statutory mission,” Powell wrote in the memo, originally reported by Bloomberg.
The memo was distributed to the Fed’s workforce, which includes approximately 3,000 staff at its headquarters in Washington, D.C., and an additional 21,000 at the 12 regional Reserve Banks spread across the country.
Powell emphasized that the move is part of a long-term organizational reassessment, not a reaction to short-term political demands.
“Experience here and elsewhere shows that it is healthy for any organization to periodically take a fresh look at its staffing and resources,” he wrote.
Voluntary Retirement Program Offered
To help manage the transition, the Fed will launch a voluntary deferred resignation program for employees who are eligible for retirement. This mirrors a similar effort undertaken in 1997, when the central bank last sought to streamline its workforce without involuntary layoffs.
The plan signals the Fed’s intention to minimize disruption, relying instead on natural attrition and incentivized exits to reshape its staff.
A Symbolic and Strategic Shift
Though the Fed is self-funded — drawing on earnings from its financial operations rather than taxpayer dollars — Powell acknowledged the central bank’s duty to be fiscally responsible.
“We must be a careful and responsible steward of public resources,” he wrote.
The effort is symbolic of a broader institutional trend in government and quasi-government bodies: even independent agencies feel compelled to demonstrate alignment with broader federal reform efforts, particularly under the current administration.
Political Context and Policy Pressure
The announcement follows growing calls within Washington for federal downsizing and reevaluation of diversity and efficiency policies. In January, Powell was asked whether the Fed would comply with Trump administration executive orders on workplace diversity.
He responded diplomatically, saying the Fed was “working to align our policies with the executive orders as appropriate and consistent with applicable law.”
In Friday’s memo, Powell made it clear that the staffing review echoes similar moments in Fed history. “The Fed has sought to rethink its staffing when the environment has changed,” he said, referencing government-wide efficiency drives of the 1990s and now.
What’s Next?
The staff reduction plan does not yet include specific targets for regional banks, nor has the Fed provided a clear timeline beyond stating it will occur gradually.
Fed officials stress that the cuts are not linked to a financial crisis or internal budget shortfall. Instead, it is an effort to modernize operations, adopt new technologies, and prepare for long-term sustainability in staffing and budgeting.
The planned reductions could also reshape internal structures and lead to more centralized operations, especially in areas where digital transformation allows consolidation.
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