Goodbye, Mr. Powell

Eight years ended Friday. Jerome Powell handed the keys to Kevin Warsh after the most divided confirmation vote in Fed history . The legacy is complicated. The numbers do not lie.

🔹 The "Transitory" Call That Defined An Era
Powell insisted throughout 2021 that rising prices would fade . "Inflation has risen, largely reflecting transitory factors," the FOMC repeated. By December, the word was dead. Inflation had already burned into the economy.

Annual CPI peaked at 9.1% in June 2022, a 40-year high . It took the Fed five consecutive years of missing its 2% target before price growth showed signs of cooling . The "transitory" call remains the most consequential policy misjudgment of the post-pandemic era .

🔹 The Most Aggressive Hikes Since the 1980s
Starting almost from zero, the Fed launched a rate-hiking cycle of historic speed. Four consecutive 75-basis-point jumbo hikes in 2022. Eleven total increases before the first pause . By July 2023, the federal funds rate sat at 5.25% to 5.50%, a 22-year high .

The bond market shattered alongside. Global fixed-income assets posted their worst year since 1949, the deepest selloff in a century . Bond vigilantes returned with force .

🔹 The Independence Fight
Trump demanded aggressive cuts. Powell refused. The president called him "Too Late Powell" . Powell absorbed the political heat in public silence. At his final press conference, he finally spoke bluntly: "I worry these attacks are battering the institution" .

He stayed on the Board as a governor after stepping down as chair, breaking 80 years of tradition specifically to defend Fed independence from further encroachment . Powell's average dissent rate per meeting sits at 0.46, the lowest of any Fed chair in modern history .

The inflation call was wrong. The independence defense was absolute.

🔹 The Final State
Powell leaves with the Fed funds rate at 3.50% to 3.75% after three cuts in late 2025 . Inflation still sits above target. The balance sheet remains massive. Warsh inherits an institution he called fundamentally broken, pledging "regime change" on day one .

The bond market is already repricing everything before Warsh holds his first meeting. Rate cut expectations vanished. Hike odds climbed toward 50%.

Bottom Line
Powell served eight years. Inflation hit 9.1%, a 40-year high. "Transitory" defined his biggest miss. Rates shot from zero past 5% in 16 months. The bond market endured its worst collapse in a century. Inflation stayed above 2% for five consecutive years. Through all of it, Powell held the line on Fed independence against relentless political pressure and exited with his institution's credibility intact, even if his inflation forecast did not survive.

History delivers a mixed verdict. Steady leadership. A massive policy error. Unwavering independence.

Friends, how will you remember the Powell era: the inflation miss or the institutional backbone?
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