How eight tumultuous years pushed Jerome Powell and the Fed to the limit

Subscribe to enjoy similar stories.For the last few years, Jerome Powell would walk past a portrait of Arthur Burns on his way to his office, addressing him silently.I’m not going to be you.Burns, the Fed chair under Richard Nixon, embodied two failures: He allowed inflation to get out of control, and he yielded to a president who wanted lower interest rates.Powell faced both hazards—inflation and presidential pressure—and more during his eight years as chair. The Fed won broad credit for its novel pandemic response, took a share of the blame for the high prices that followed and confounded predictions by bringing inflation down without a recession.

Powell then weathered the most sustained political assault on the central bank in its modern history.“It’s probably the most difficult time to be a central banker since the Fed was created,” said Daleep Singh, who ran the New York Fed’s markets desk in 2020.Powell leaves with the political verdict still being fought and the economic one still being argued. Inflation, even before the Iran war, was nearly a percentage point above the Fed’s 2% goal.Under Powell, the Fed took big swings.

When the Covid pandemic hit, he slashed rates to zero and pushed the Fed’s operational reach to its limits, expanding lending into corners of the economy the central bank had never touched. He then raised rates at the fastest pace in four decades as inflation raged.

But at other times, Powell refused to swing: when economists urged the Fed to engineer a recession to stamp out inflation, or when a president pressed him for deeper cuts even as prices threatened to rise again.The institution Powell hands to Kevin Warsh, his successor as chair, is one he tried to keep out of partisan fights. When