I don't think the Admin UI is working properly for the Directory>User>setPassword permission.
However, you can teach folks to use the API Explorer in the Developer Center
https://developer.mypurecloud.com/developer-tools/#/api-explorer/api/v2/users/{userId}/password
I tried it with a user who just has the setPassword permission and it works.
You should probably open a case with Care regarding getting it to work in the Admin interface.
------------------------------
George Ganahl GCP (PureCloud) ICCE CCXP
Principal Technology Consultant
Genesys
------------------------------