Interest rate hikes, fighting the pandemic, challenging the president: How will Powell's eight years at the Federal Reserve be written into history?

He endured the pandemic and the highest inflation in forty years, achieving a soft landing, but left behind the regret of excessive inflation.
He was called an "idiot" by Trump, but also gained praise for his counterattacks. As Powell prepares to step down, his greatest legacy may be the defense of central bank independence.

On a Sunday night in January 2026, Federal Reserve Chair Jerome Powell released a two-minute video speech.
The scene was simple: he was dressed in a suit standing in front of a blue background, but this public statement was seen as one of the most iconic moments of his eight-year term.

A few days earlier, the Fed had received a subpoena from the Department of Justice, seen as the peak of President Trump’s pressure to force a rate cut.
For a long time, Powell deliberately avoided direct conflict with Trump, but this time he chose to respond directly.
In his public speech, he clearly stated: "The threat of criminal charges stems from the fact that the Federal Reserve sets interest rates based on our best judgment of how to serve the public, not following the president’s preferences."

Even before this survival battle erupted, Powell’s leadership period was more turbulent than most.
He had to deal with an unprecedented "Level 5" crisis—the global COVID-19 pandemic and economic shutdown—and shortly after, a crisis of inflation soaring to a forty-year high.
He guided the Fed through a regional banking crisis (which brought criticism of lax regulation) and internal scandals (leading to several resignations of senior officials).

During the attempt by Trump to carry out a century-scale government overhaul and concentrate executive power in the White House, the Fed remained one of the few agencies to push back—this elevated Powell’s approval among the public to a new level, perhaps also cementing his place in history.
He and his allies believe this struggle is about the Fed’s ability to fulfill its duties without interference from politicians seeking election—thus about the stability of the U.S. economy itself.

Policy storms and inflation disputes

Powell’s tenure was marked by high uncertainty from the start.
In 2018, upon taking office, he pushed the Fed to raise rates four times in his first year, trying to end the long period of low interest rates after the financial crisis, but this move soon clashed with the Trump administration’s economic stimulus policies.

Subsequently, the U.S. labor market experienced unusual changes: unemployment fell below 4% and continued to decline, yet did not trigger the inflation rise predicted by traditional theories.
Instead, employment opportunities increasingly flowed to Black people, women, and disabled groups.
Powell— the first Fed chair in forty years without an economics degree—adjusted policies in his second year, allowing inflation to run above 2% for a period to compensate for the long below-target phase and to avoid early rate hikes that could suppress employment.
This meant abandoning deeply rooted orthodox views.

This framework was officially established in August 2020, but was almost simultaneously hit by reality.
The COVID-19 pandemic spread rapidly, plunging the U.S. economy into a shutdown.
In March 2020, unemployment surged to 22 million, reaching the highest level since the Great Depression of the 1930s.
The Fed quickly cut rates to zero and launched large-scale asset purchase programs and market support tools, including direct purchases of corporate and municipal debt.

While promoting monetary easing, Powell also publicly called for fiscal stimulus.
In April 2020, he said: "Now is the time to leverage America’s enormous fiscal capacity."
Subsequently, Congress approved about $5 trillion in economic stimulus under the Trump and Biden administrations.

The economy recovered rapidly, and employment fell below 4% by the end of 2021, but inflation began to spiral out of control.
Supply chain disruptions, labor shortages, and surging demand jointly pushed prices up, leading to the most severe inflation shock in decades.

Faced with this, Powell at one point described inflation as "temporary."
Mohamed El-Erian, CEO of Pacific Investment Management Company (PIMCO), wrote in May 2021: "For most companies, demand is no longer the problem... On the contrary, they are working to ensure supply."
He warned the Fed to consider multiple possible paths.

By the end of 2021, Powell abandoned the "temporary" description.
In March 2022, with inflation approaching a forty-year high and energy and food prices driven higher by the Russia-Ukraine conflict, the Fed launched an aggressive rate hike cycle, raising rates by a total of 4.25 percentage points that year—the largest tightening since Paul Volcker’s era.

Critics argued that the Fed was slow to respond.
Adam Posen, director of the Peterson Institute for International Economics, pointed out that policymakers overfocused on unemployment risks and failed to respond promptly to inflation pressures from fiscal stimulus.
Jared Bernstein, Biden’s economic advisor, called the "transitory inflation" theory a "widely accepted analytical error," comparing Powell to a pilot flying through turbulence.

Subsequently, the Fed adjusted its policy framework, abandoning tolerance for inflation exceeding targets, and in 2025, removed the "inclusive" employment language from new guidelines, returning to a more traditional path.
Nevertheless, inflation has remained above 2% since 2021.

Powell’s path was also fraught with other difficulties.
In 2023, a regional banking crisis saw the collapse of Silicon Valley Bank and two other banks, one of the largest bank failures in U.S. history.
The Fed’s rescue efforts prevented a wider crisis—but also led some analysts to question whether regulators could have taken more measures earlier to prevent the collapses.

There were also a series of embarrassing scandals, prompting calls for greater transparency and accountability at the Fed, and leading Powell in 2022 to implement stricter rules limiting policymakers’ investment activities.
Yet troubles continued: last year, board member Adriana Kugler resigned after violating Fed investment and trading policies.

After Trump returned to the White House, Powell scaled back efforts on diversity, equity, and inclusion, and announced layoffs aligned with Trump’s reduction of the federal workforce.
The Fed also withdrew from a global central bank climate risk research alliance—an alliance joined shortly after Biden’s election.

Powell said such shifts, when appropriate, reflect the new administration’s directives and are consistent with the Fed’s long-standing practices.
But both sides criticized these changes.
At a congressional hearing earlier last year, Powell was accused by Republican Tim Scott of being "whimsical with the wind," and shortly after, by Democrat Elizabeth Warren of "drifting deeper into politics" to appease Trump.

However, compared to the climax of his confrontation with Trump, all this seems minor, and when the critical moment arrives, key members of Congress stand in support of him.

Facing off with the White House

Inflation has reshaped U.S. politics.
Rising living costs became a key issue in the 2024 election, with Trump promising to return to the White House.
Soon, his criticism of the Fed escalated, openly calling Powell "Mr. Too Late," and even discussing removing him.

The conflict intensified.
The Trump administration not only questioned Fed policies but also focused on the headquarters renovation project.
In summer 2025, Trump personally visited the site, inspecting with Powell wearing a hard hat, claiming the project cost more than the official $2.5 billion.
Powell checked the documents on the spot and pointed out that Trump "got the numbers wrong," a scene that quickly spread widely.

Later, the government attempted to dismiss Fed Governor Lisa Cook with unverified mortgage fraud charges, a case still awaiting Supreme Court decision.
That fall, investigations into the renovation project further triggered subpoenas, escalating the conflict.

In response, Powell adopted a more proactive stance.
He announced he would remain on the Board after his term ends on May 15, with his term lasting until January 2028, and made it clear he would not leave as long as legal actions against the Fed continued.
This move was extremely rare in history and sparked controversy.

Congress became a key battleground.
Senator Thom Tillis said he would delay advancing Kevin Warsh’s nomination until investigations concluded.
Later, U.S. Attorney Jeanine Pirro announced the investigation was terminated and handed over to internal Fed oversight, while reserving the right to reopen the case, reiterating this possibility this month.

The debate over central bank independence heated up.
Former Fed Chair and Treasury Secretary Janet Yellen said this confrontation "will be a crucial part of his legacy."
Former Treasury official Michael Faulkender stated that despite poor inflation performance, "he will be praised in history for defending the Fed."

Successor and unfinished battles

Warsh’s nomination has moved to the Senate for review.
At hearings, he promised to maintain independence and criticized the Fed for failing to control inflation post-pandemic, calling it a "fatal policy mistake."
He also proposed major reforms to the policy framework and communication strategies.

But the environment he faces remains complex:
On one side, political pressure from Trump to cut rates; on the other, internal Fed tendencies to keep rates steady and new inflation risks, including the Iran war.

Before leaving office, Powell’s advice focused on institutional reforms.
In March, he said the Fed should stay away from election politics, maintain communication with Congress, and respect the Fed’s internal expertise: "Ultimately, when we look back on our careers, we want to know we did the right thing."

After stepping down, he will still participate in decision-making.
It is expected that he will attend the June FOMC meeting as a regular governor and has made it clear he will not act as a "shadow chair" influencing his successor.

Looking back on his tenure—from pandemic shocks to high inflation and institutional conflicts with the White House—Powell’s experience has been full of twists and turns.
As Fed historian Peter Conti-Brown said, "No matter which chapter you look at, his place in history is secure."