Over the past few years, Powell would pass a portrait of Arthur Burns on his way to the office, silently telling him: I will not become you.
Burns, the Federal Reserve chairman under Richard Nixon, failed in two ways: he allowed inflation to spiral out of control, and he yielded to a president demanding low interest rates.
During his eight-year tenure as chairman, Powell faced both of these risks—inflation and presidential pressure—and more. The Fed earned widespread praise for its novel pandemic response measures, took partial responsibility for the ensuing high prices, and successfully lowered inflation without triggering a recession, defying all predictions. Subsequently, Powell weathered the most sustained political attack in the modern history of the Federal Reserve.
"This may have been the most difficult period for a central banker since the Fed's inception," said Daleep Singh, who headed the New York Fed's markets division in 2020.
As Powell steps down, political judgments remain contentious, and economic conclusions are still debated. Even before the outbreak of the Iran war, inflation remained nearly a full percentage point above the Fed's 2% target.
Under Powell's leadership, the Fed dared to take bold actions. During the COVID-19 pandemic, he cut interest rates to zero, pushed the Fed's operational scope to its limits, and extended lending to areas of the economy the central bank had never touched before.
Later, when inflation raged, he raised interest rates at the fastest pace in four decades. But at other times, Powell refused to act: when economists urged the Fed to engineer a recession to crush inflation, and when Trump pressured him to cut rates further even as prices faced the risk of rising again.
The institution Powell hands over to his successor, Kevin Warsh, is one he tried to keep out of partisan battles. When that effort failed, he focused on preventing these battles from altering the Fed's analytical, evidence-driven culture. This fight continues, which explains why the 73-year-old Powell will remain on the Federal Reserve Board—the first departing chairman to do so in 75 years.
The pandemic struck global markets first. In March 2020, as global markets froze and the U.S. Treasury market began to malfunction, Powell and his colleagues hastily rolled out unprecedented emergency plans. That spring, internal Fed scenarios included a "depression" path—with unemployment nearing 20% within a year.
Powell told colleagues it felt like chasing a speedboat—giving it your all but still falling behind. By the end of the month, after cutting rates to zero, they began buying Treasury and mortgage bonds on an unprecedented scale. For the first time, the Fed ventured into direct lending to businesses, municipalities, and mid-sized companies.
"I would go to bed thinking about a market that might not open, and by eleven o'clock, there was a new plan," said Ajay Rajadhyaksha, global head of research at Barclays. "The next morning, if it didn't work, the scale would be increased."
For several programs, the mere announcement was enough. Once markets knew the Fed would stand behind them, the previously panicked markets recovered. Even Trump, who had spent a year venting his anger at his appointed Fed chairman, called to congratulate Powell, calling him "my best progress player."
Powell later described those most grueling weeks. In a 2021 interview, he said, "You feel terrible every minute. Exhausted, not sleeping well, it's just a bad feeling. You better get it right."
Getting it right became more difficult. By mid-2021, as vaccinations encouraged Americans to go out after a year of pandemic restrictions, prices rose at a pace not seen in decades. At the time, the Fed's confidence that the inflation surge would be "transitory" was widely shared by economists. But in hindsight, keeping the monetary taps wide open became the biggest mistake of Powell's tenure.
Officials made a bet: inflation was a problem of society reopening and would resolve itself. Supply chain bottlenecks would ease; pandemic-era demand would stabilize.
They had their reasons. "We didn't do enough during the global financial crisis, so this time we overdid it," said Patrick Harker, former president of the Philadelphia Fed, who stepped down last June.
Making matters worse, Powell and his colleagues had just adopted a brand-new overarching strategy designed to address the previous decade's problem—persistent economic weakness. This framework also failed to anticipate Biden's $1.9 trillion stimulus plan in March 2021.
John Cochrane, an economist at Stanford University's Hoover Institution, said this framework proved to be "a carefully constructed Maginot Line to defend against what was seen as an endless deflation threat." In his view, a central bank that had just built defenses against one threat was powerless to recognize another when it struck.
This bet collapsed in November 2021—the same month Biden reappointed Powell. Consumer prices accelerated. Months later, the Russia-Ukraine conflict broke out, pushing inflation to a four-decade high.
Powell spent the next two years correcting his misjudgment. To fight back inflation, the Fed raised interest rates at the fastest pace in four decades. Weeks after Powell ruled out a 75-basis-point hike, the Fed did just that—and then did it three more times.
In August 2022, at the Fed's annual symposium in Jackson Hole, Wyoming, Powell gave an eight-minute speech, quoting Paul Volcker and warning that the process of lowering inflation could bring "pain."
At the reception that evening, a country band was playing. Powell, who had danced in earlier years, stayed seated this time. He told a colleague, "After a speech like that, you can't dance."
Nevertheless, Powell refused to abandon the idea of a soft landing—lowering inflation without triggering a recession. That fall, during a Q&A session after a speech, he rejected the "shock and awe" framework proposed by JPMorgan economist Michael Feroli, which advocated for more aggressive rate hikes.
"We're not going to just raise rates, try to crash the economy, and then clean up the mess," Powell said.
The sharp swings in interest rates came with clear costs. Higher rates doomed the housing market to dysfunction. Homeowners who had refinanced at low rates during the pandemic were reluctant to move; potential buyers couldn't afford the homes on the market.
The rate-hiking cycle also put pressure on banks that had heavily held long-term Treasuries when yields were near zero. In March 2023, this pressure finally erupted. Silicon Valley Bank (SVB), a regional bank holding large amounts of such bonds, collapsed—the largest bank failure since 2008.
Other banks began to wobble. The Fed and the Treasury acted swiftly to contain the panic.
The Silicon Valley Bank incident was the second major stain on the Fed under Powell's leadership—this time occurring within the banking regulatory system rebuilt after 2008.
"Thousands of pages of regulations, an army of regulators, and they missed the most obvious interest rate risk. They really missed the elephant in the room," Cochrane said.
When asked about regrets that spring, Powell quoted Frank Sinatra's lyrics. "I've certainly had some regrets," he said. "Who wouldn't look back and think they could have done things differently? But honestly, you don't get a do-over."
By the summer of 2024, signs of a soft landing emerged. Inflation was falling, unemployment was rising modestly, and wages were cooling. The Fed began cutting rates in September of that year. The pain Powell had warned about was milder than almost anyone had imagined.
"I think this will go down as one of the great chapters in modern Fed history," Singh said.
Powell reshaped the Fed's communication style. His predecessors were all economics Ph.D.s. With a background in finance, Powell spoke "more plainly," without "academic jargon," said veteran investment manager Krishna Memani. When scrutiny intensified, this style became an institutional advantage.
The chapter of Powell's tenure that may be remembered decades from now has nothing to do with monetary policy. A sitting president tried more systematically than any predecessor to bend the Fed to his will. When others in American institutions—Congress, corporate boards, universities, and law firms—chose to compromise, Powell stood firm.
Shortly after Trump returned to the White House, he began attacking Powell. When his tariffs threatened to slow growth and raise prices, he called Powell a "big loser" for not cutting rates and considered firing him. His administration argued that the Fed was fighting the wrong battle—this time, being overly concerned about inflation.
It was for this reason that Powell built bipartisan credibility—meeting frequently with Republican and Democratic lawmakers over the years. "When this fight came, the Fed had many friends because Powell had invested the time," Harker said.
The pressure crossed a new line last August. For the first time, a sitting president attempted to fire a Fed governor—Trump targeted Lisa Cook.
Around the same time, Trump seized on cost overruns in the Fed headquarters renovation to question Powell's competence. Trump's Justice Department then launched a criminal investigation, which the president himself welcomed.
Powell did not silently endure this investigation. In January of this year, he released a startling video disclosing that he was under investigation and characterizing it as a pretext to pressure the central bank to cut rates.
Powell's response did not surprise those who had weathered crises with him over the years. "Powell has an inner strength and a principled view of his duties," said European Central Bank President Christine Lagarde in an interview. "It's deeply ingrained in him."
The tests Powell faces will last longer than his chairmanship. In April, federal prosecutors said they would drop the investigation into the renovation. Cook's case is before the Supreme Court, where justices are weighing when a president can fire a Fed governor.
"Powell will certainly go down in history for his final great act—standing up to Trump. I think this reveals his honesty, integrity, and reverence for this institution," said Cochrane, who had previously criticized Powell's handling of inflation. "I doubt anyone else could have done better."
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