Fed announces plan to cut workforce by 10% by the year 2027
The Federal Reserve, one of the United States' most influential financial institutions, has announced plans to reduce its workforce by 10% over the next few years. Eligible employees will be notified via email, according to a spokesperson.
This move aligns with broader government-wide efforts to improve efficiency, as outlined in executive orders from the 1990s and recently reaffirmed. While the Federal Reserve is not specifically mentioned in the recent plans or rulings related to federal workforce reductions, the Supreme Court's decision on July 8, 2025, allowed the Trump administration to proceed with a broad executive order to reduce the federal workforce by large-scale cuts.
On February 11, 2025, President Donald Trump issued an executive order instructing federal agencies to prepare for large-scale reductions in force (RIFs) consistent with applicable laws. The plan, set to significantly shrink the overall federal workforce, could result in hundreds of thousands of federal jobs lost across various departments.
The plan has faced multiple legal challenges, with critics arguing that the reductions are unprecedented, unsanctioned by Congress, and threaten critical government services. However, the Supreme Court overruled lower court injunctions that previously blocked the implementation of these cuts, allowing the administration to move forward while litigation continues.
The Federal Reserve's headcount reduction aims to streamline operations thoughtfully and deliberately over time to better reflect current conditions. The reduction will be achieved through a voluntary deferred resignation program offered to eligible Fed employees.
Meanwhile, the Consumer Financial Protection Bureau seeks to cut 90% of its staff, while the Federal Deposit Insurance Corp. plans to reduce its headcount by 20%, or 1,250 employees. These headcount reductions are not directly linked to the Fed's or the Department of Government Efficiency's cuts.
The Fed's Chair, Jerome Powell, stated that the move is to periodically review staffing and resources. The leaders have been instructed to consolidate functions, modernize business practices, and ensure right-sizing to meet the statutory mission.
The court battle over the cuts at the Consumer Financial Protection Bureau is ongoing. It is worth noting that the Consumer Financial Protection Bureau's headcount reduction is not tied to eligible employees who would otherwise retire at the end of a specific year, unlike the Fed's plan.
The Federal Reserve currently employs approximately 24,000 people. The Fed's planned headcount reduction, like the widespread cuts and layoffs at the Department of Government Efficiency, led by Elon Musk, is part of a larger drive to reshape and streamline the federal government, improving efficiency and reducing government size and spending.
However, opposition to these cuts is significant. Justice Ketanji Brown Jackson dissented from the Supreme Court’s decision, emphasizing the "enormous real-world consequences" including loss of services and mass federal employee terminations. Labor unions, cities such as Baltimore, Chicago, and San Francisco, and advocacy groups have expressed concerns about the impact on democracy and essential public services.
The Federal Deposit Insurance Corp.'s and the Consumer Financial Protection Bureau's headcount reductions are not obligated to follow the orders of President Donald Trump, as they are independent bodies. The program was previously offered in 1997.
In conclusion, while the Federal Reserve's headcount reduction is part of a larger government-wide effort to improve efficiency, it is important to consider the potential impact on government functions and services. The Supreme Court's recent ruling allows these plans to proceed despite ongoing legal challenges and opposition.
The Federal Reserve, in line with the broader government-wide efforts, is reducing its workforce by 10%, seeking to streamline operations and modernize business practices. This move is not directly linked to the headcount reductions at the Consumer Financial Protection Bureau or the Federal Deposit Insurance Corporation.
The reduction at the Federal Reserve, similar to the widespread cuts across various departments, is part of an effort to reshape and improve efficiency within the federal government, potentially affecting government functions and services.
