Jerome Powell chaired his final monetary policy meeting this week. His record as Federal Reserve chair contains two major chapters that will be debated for years: the fastest emergency response in the Fed’s modern history during Covid and an inflation mistake followed by a tightening cycle that somehow avoided a recession.
Both deserve serious analysis but the achievement that sits above either of them is that Powell leaves behind a Federal Reserve whose independence is intact after years of sustained political attack from US president Donald Trump. Whether that inheritance holds is now the most important question in central banking.
Powell’s monetary policy and economic achievements as Fed chair are impressive.
When the Covid-19 pandemic hit in March 2020, Powell moved faster than almost any central banker in history. Rates went to near zero within days, emergency lending programmes launched across multiple parts of the economy and the Fed's balance sheet expanded from around $4.5trn to $8.9trn. The Fed bought corporate bonds directly for the first time in its history.
This worked: the US avoided a full economic collapse and Powell received rare bipartisan praise, including, briefly, from Trump, who had already spent two years attacking him by this point.
Powell’s inflation record needs to be addressed, however. As the US economy reopened and fiscal stimulus flooded the system, prices rose sharply but the Fed asserted it would be “transitory”.
Only it wasn't. US inflation steadily rose throughout 2021 and the Fed only started increasing interest rates in March 2022. By mid-2022, inflation had reached 9.1%, the highest in four decades. The Fed’s delay had made what followed more painful than it needed to be.
The central bank had to perform one of the fastest tightening cycles in its modern era, with rates moving from near zero to 5.25% in around 16 months. Powell moved without hesitation once it was clear inflation was not going away and the speed of the correction reflected a genuine willingness to absorb the political cost.
Most forecasters expected the tightening to produce a recession, but there wasn’t one. Inflation had come back down to around 2.3% by April 2025 and the labour market stayed broadly intact throughout.
That combination is rare when a central bank tightens at that pace and scale, so the soft landing engineered by Powell was a genuine achievement even if the conditions that made it necessary were partly self-inflicted.
But Powell’s tenure has been marked by his public struggle with Trump over interest rates, particularly more recently when the US president has been vocal in calling for cuts.
The battle over Fed independence did not begin when Trump returned to the White House for this second term. It began in August 2018, months into Powell’s first year as chair, when Trump publicly complained he was “not thrilled” with rate rises. By August 2019, Trump was calling Powell an “enemy” of the US.
Trump’s return to office in January 2025 brought a significant escalation. He posted publicly that “Powell's termination cannot come fast enough” and his administration began investigating a $2.5bn renovation of the Fed’s Eccles Building. In July 2025, Trump reportedly wrote a letter dismissing Powell as chair, though he later denied it.
Then, in January 2026, the confrontation reached a level with no modern precedent. Powell announced that the Department of Justice had served the Federal Reserve with grand jury subpoenas, with criminal charges framed around his congressional testimony on the renovation project.
Powell hit back, arguing the investigation was a consequence of the Fed setting interest rates based on economic judgement rather than presidential instruction.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation,” Powell said at the time.
Former Fed chairs Greenspan, Bernanke and Yellen, alongside former treasury secretaries Paulson, Geithner, Rubin and Lew, issued a joint statement calling it “an unprecedented attempt to use prosecutorial attacks to undermine [the Federal Reserve’s] independence”.
That a statement of that kind was considered necessary by figures of that stature tells you everything about what was at stake.
Powell leaves the chair post having got one major call wrong, having navigated one of the most consequential monetary episodes in decades and having held the line for eight years against pressure that culminated in a criminal investigation.
Kevin Warsh has now been confirmed as the incoming chair. Powell will remain on the board as a governor, which creates a dynamic with no obvious recent parallel.
Warsh has historically been hawkish on balance sheet expansion and critical of the Fed’s post-crisis tools. Trump wants lower rates. Those two positions are not obviously compatible and Warsh will face that tension almost immediately.
The question now is whether Warsh treats the inheritance left by Powell as valuable or inconvenient. If markets sense that decisions are being made for political reasons rather than economic ones, it will rightly question the Fed’s independence.
The value of an independent Fed cannot be overstated - it is what keeps the inflation risk premium out of long-term yields. When investors believe rate decisions are made on economic grounds, they price accordingly. When they don’t, they reprice for the uncertainty.
That repricing was prevented by Powell’s impressive effort to hold the line and refusal to bend. When Powell steps down in two weeks, Warsh will take over that line.