Federal Reserve Chair Jerome Powell’s eight-year term spanned a global pandemic that drove unemployment higher, a surge in inflation to a 40-year high, a Justice Department investigation related to the central bank’s headquarters renovation and ongoing criticism from President Donald Trump.
Powell confronted a series of crises during his tenure leading the Federal Reserve, navigating obstacles that touched everything from household finances to the institution’s independence.
Trump’s nominee, Kevin Warsh, is poised to take over, inheriting an economy that remains solid by some measures but is again seeing inflation pressure, driven in part by tariffs and higher energy prices linked to the Iran conflict.
Powell said last month he plans to remain on the Federal Reserve’s governing board after stepping down as chair, an unusual move that would allow him to continue influencing interest rate decisions through 2028. He will hold the temporary designation until Warsh officially becomes the Fed’s 17th chair. Powell has said he expects to step down as a governor once an investigation into the central bank’s headquarters renovation is resolved.
The handoff offers a moment to assess Powell’s record, which covered two administrations, three Treasury secretaries and 66 interest rate decisions.
Powell's early days
When Trump nominated Powell in 2017, he praised him as a “consensus-builder for the sound monetary, and financial, policy that he so strongly believes in” and said Powell had “the wisdom and leadership to address the challenges that our economy may face.”
That early support gave way to repeated attacks as Trump pushed the central bank to lower interest rates.
Powell, a former investment banker and Treasury official under President George H.W. Bush, took over in 2018 as the economy was strong, unemployment hovered near historic lows and inflation stood slightly above the Fed’s 2% target.
He raised interest rates four times in his first year to keep inflation from rising too quickly, a move that pushed up borrowing costs but left room to cut rates if the economy weakened. That moment came quickly.
Pandemic response
In March of 2020, as financial markets unraveled at the start of the pandemic, Powell and his colleagues launched sweeping emergency programs that included large-scale bond buying, purchasing massive amounts of Treasury and mortgage-backed securities to keep lending flowing.
Policymakers also cut interest rates to near zero, lowering borrowing costs and driving refinancing and loan activity across both housing and commercial property sectors as the economy shut down.
At the same time, the unemployment rate jumped 4.4% in March to 14.7% in April, according to data from the U.S. Bureau of Labor Statistics.
Data from the National Bureau of Economic Research showed that the COVID-19 downturn lasted only two months, marking it as the shortest recession in history.
‘Transitory’ inflation
Inflation began to accelerate in 2021, fueled by supply constraints tied to the COVID‑19 pandemic and later intensified by the Russia‑Ukraine war.
By mid‑2021, as vaccinations lifted restrictions and Americans returned to travel and spending, prices were rising at a pace not seen in decades.
At that time, Powell and many economists believed the surge would be temporary, as supply-chain disruptions sorted themselves out and business returned to normal operations.
The Fed kept policy loose in 2021 before raising rates sharply to contain price growth, a delay that former Fed officials say allowed inflation pressures to build.
By the spring of 2021, “it was pretty clear that the fiscal stimulus was going to provide a substantial increase in inflationary pressures,” said Jeffrey Lacker, former president of the Federal Reserve Bank of Richmond from 2004 to 2017.
Policymakers “convinced themselves it was going to go away relatively soon,” Lacker said. “And by Labor Day, it was clear it wasn't going away.”
Then, inflation peaked at a four-decade high of 9.1% in June 2022. Powell responded by launching the most aggressive series of rate increases in four decades, pushing the Fed’s benchmark rate to its highest level since 2001 and driving up borrowing costs for mortgages, credit cards and other loans.
Lacker said the episode underscored the importance of acting earlier to contain price pressures.
“There’s a good reason why policy was preemptive, why rates were raised to nip incipient inflation in the bud,” he said. “But the other thing is that the framework should be handled very, very carefully, and future revisions should look to maintain credibility, bolster the credibility of the Fed.”
Risk taking
Powell’s moves carried risks. Higher rates caused the housing market to stall, locking in homeowners who had refinanced at pandemic-era lows while pricing out would-be buyers. The rapid tightening also put pressure on banks, culminating in the collapse of Silicon Valley Bank in March 2023.
At the time, Powell said smaller banks could close or merge because of commercial real estate exposure, though he described the risks as manageable. Regional lenders were particularly exposed, with commercial real estate loans accounting for about 44% of credit at smaller banks, compared with lower shares at larger institutions.
That pressure has been compounded by a refinancing crunch in commercial real estate, as property owners face a rapid change from low-rate debt to higher borrowing costs.
In June 2023, inflation had cooled to 3%, though many Americans continued to feel the strain of higher prices. Elevated borrowing costs weighed on household budgets, even as the job market remained strong and a recession failed to materialize.
In 2024, the economy showed signs of stabilizing as price pressures eased and unemployment remained relatively low. The Fed began cutting interest rates in September, less than two months before the presidential election, drawing criticism from allies of Trump, who argued the move was an attempt to help Democrats by boosting the economy ahead of the vote. Trump went on to win the presidency.
Fighting for Fed independence
Within weeks of returning to the White House in early 2025, Trump began publicly criticizing Powell, calling for lower interest rates and reopening tensions that had surfaced during his first term.
In the following months, Trump zeroed in on cost overruns tied to the renovation of the central bank’s headquarters in Washington, D.C. Last July, Trump toured the site, the first visit by a sitting president in nearly two decades.
The Fed said the rising costs stemmed from unexpected construction expenses and that the renovation project would ultimately “reduce costs over time by allowing the Board to consolidate most of its operations,” according to the Fed’s website.
By January, the dispute escalated when the Justice Department launched a criminal inquiry into Powell, an extraordinary development and the first such case involving the Fed’s chief in the organization's 113-year history. The probe focused on his testimony to Congress about the renovation.
Powell responded with a rare public rebuke calling the investigation politically driven and warning it was part of a broader effort to sway monetary policy.
"No one, certainly not the chair of the Federal Reserve, is above the law,” Powell said. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
Trump denied any role in the investigation, which the Justice Department later moved to dismiss. The matter has since been referred to the central bank’s inspector general.
A challenging moment
Warsh, a former policymaker, is set to take the helm for a four-year term at a challenging moment.
Inflation rose for a second straight month, driven in part by higher gasoline prices as the Iran conflict pushed energy costs higher. Annual inflation reached a three-year high, according to government data.
“So, 3% [inflation] is not 2%, and it's far enough away that it's a significant divergence from what the Fed has promised,” Lacker said.
Even so, parts of the economy remain strong. The unemployment rate held steady at 4.3% in April, near historic lows and little changed from when Powell took over in 2018.
Lacker said Warsh is stepping into a Fed that still has unfinished work.
“He's inheriting an unfinished job,” Lacker noted. “He's got business to take care of to get inflation down to 2%. In my view, [this] should be his major focus.”
He added that policymakers are unlikely to ease policy soon.
“I don't think they're going to cut rates anytime soon.”