Reflecting on Powell's Tenure as Fed Chair Concludes

Jerome Powell's eight-year tenure as Chair of the Federal Reserve was marked by a succession of crises. His term concludes this Friday. Throughout, Powell's decisions impacted both the everyday budgets of ordinary Americans and the political independence of this pivotal institution.

Kevin Warsh, nominated for the role by President Donald Trump, is set to take over. By some measures, the U.S. economy retains resilience, yet it faces renewed inflationary pressures.

Last month, Powell indicated that upon the conclusion of his chairmanship, he would unusually remain on the Fed's 12-member Board of Governors. This move allows Powell to continue participating in interest rate policy decisions until 2028; however, he stated he would resign from the board once the Fed Inspector General's investigation into the central bank headquarters renovation is completed.

This transition of power offers an opportunity to review Powell's tenure—spanning two presidents, three Treasury Secretaries, and involving 66 interest rate decisions.

"You don't get to choose your challenges, but you do get to choose how you respond," said Claudia Sahm, a former Fed official and chief economist at Sahm Consulting, in an interview. "Ultimately, Powell's historical standing will be judged by these outcomes."

When President Trump nominated Powell for the Fed chairmanship in 2018, he described him as a "consensus builder" with "a strong feel for economic growth."

Powell, a former investment banker who served in the Treasury Department under President George H.W. Bush, officially became Fed Chair in 2018. At that time, the economy was robust, unemployment was at historic lows, and inflation was slightly above the Fed's 2% target.

In his first year, Powell raised interest rates four times, which pressured stock markets but created room to cut rates later to stimulate the economy during a slowdown. Policymakers soon faced a major test.

During an emergency meeting in March 2020, Powell cut rates to near zero to support the severely impacted economy.

"Households, businesses, schools, institutions, and all levels of government are taking steps to protect public health. These measures are critical to containing the virus, but they will also weigh on economic activity in the near term," Powell told reporters at the time.

Data from the Bureau of Labor Statistics showed the unemployment rate surged from 4.4% in March to 14.7% in April.

To vigorously drive recovery, the Trump and subsequently the Biden administrations rolled out economic stimulus packages to aid the unemployed and those in need. Combined with low-interest-rate policies, the U.S. economy rebounded rapidly from the recession.

According to the National Bureau of Economic Research, the COVID-19 recession lasted only two months, the shortest in U.S. history.

Alan Blinder, a Princeton University economics professor and former Fed Vice Chair, stated that the rapid recovery validated the Fed's decision to cut rates, even though the choice was not difficult at the time.

"Cutting rates to zero was necessary and appropriate, and in a sense, obvious," Blinder said.

However, severe inflation soon followed—supply chain disruptions and the Russia-Ukraine conflict exacerbated price pressures. Powell initially downplayed the impact of rising prices, calling it "transitory" inflation. This assessment became a significant misstep of his tenure, which Powell later acknowledged.

By June 2022, the U.S. annual inflation rate had soared to 9.1%, a 40-year high. By then, Powell had already initiated a rate-hiking cycle that lasted a year. A series of aggressive rate hikes pushed the Fed's benchmark rate to its highest level since 2001, causing mortgage and credit card rates to surge.

By June 2023, the annual inflation rate had fallen back to 3%, but public dissatisfaction with price increases persisted. Many economists predicted a recession and job losses, which fortunately did not materialize.

"Inflation stayed too high for too long, but it came down quickly and without unnecessary damage to the labor market," said Wendy Edelberg, director of The Hamilton Project and a senior fellow at the Brookings Institution.

In September 2024, less than two months before the presidential election, the Fed cut rates by 0.5 percentage points. This move drew criticism from Trump's camp, which viewed it as an attempt to boost the economy for the incumbent Democratic administration ahead of the election. Trump ultimately won the election.

In early 2025, within weeks of returning to the White House, Trump publicly criticized Powell, urging him to cut rates. This attack continued and intensified the criticism Powell faced during Trump's first term.

In the following months, Trump persistently attacked Powell, accusing him of cost overruns in the Fed's Washington headquarters renovation project. In July of last year, Trump became the first sitting president in nearly 20 years to visit the Fed, donning a hard hat to tour the renovation site with Powell.

The Fed's website stated that cost overruns were due to unforeseen expense increases and that the renovation would "reduce long-term costs by consolidating most operations."

In January 2025, the U.S. Department of Justice initiated a criminal investigation into Powell, escalating tensions between the White House and the Fed to an unprecedented level. This marked the first criminal investigation of a sitting Fed Chair in the institution's 113-year history.

The investigation centered on Powell's congressional testimony last year regarding the renovation cost overruns. Powell issued a rare video statement condemning the investigation as politically motivated, aimed at interfering with the Fed's interest rate policy.

"No one—certainly not the Chair of the Federal Reserve—is above the law," Powell said. "But this unprecedented action should be viewed in the context of this administration's long-standing threats and persistent pressure."

Trump had previously denied involvement in the criminal investigation. Last month, the Justice Department dropped the criminal charges against Powell. U.S. Attorney for Washington, Janine Pirro, stated that the investigation related to the renovation would be taken over by the Fed Inspector General.

"The attacks on the Fed Chair were appalling," said Rebel Cole, a finance professor at Florida Atlantic University and former Fed official. "Powell withstood the pressure."

Former Fed official Kevin Warsh will assume the chairmanship for a four-year term. In the coming period, he will lead the Fed as central bank policies globally face challenges.

Government data shows that inflation rose for the second consecutive month in April, driven by persistently high gasoline prices due to the ongoing U.S.-Iran conflict, pushing the annual inflation rate to a three-year high.

Despite this, some economic indicators show resilience.

The unemployment rate in April remained stable at a historically low 4.3%, roughly the same as when Powell took office in 2018.

"The economy overall is in good shape, but far from perfect," Blinder said. He criticized Powell's handling of inflation while also attributing some responsibility to the Iran conflict, and praised Powell for upholding the Fed's independence.

"This is the situation Warsh inherits," Blinder concluded.