After stepping down as chair of the Federal Reserve on 15th May, Jerome Powell will not be remembered as a grand theorist of money. He will be remembered as something more useful: a crisis manager who discovered, in real time, that the old central-banking playbook no longer worked.
Powell inherited an economy late in the cycle. He then faced public scrutiny from the president who appointed him, a pandemic that shut down the global economy, the worst inflation surge in 40 years, and a policy challenge that most economists long considered impossible: bringing inflation down without pushing the U.S. into recession.
According to some commentators, he made a major mistake. He kept policy too loose for too long and clung to the idea that inflation would prove ‘transitory’. That error will define part of his record. But it is not the whole record.
After the worst inflation shock in decades, Powell’s Fed tightened at extraordinary speed and, at least so far, avoided the kind of deep downturn that usually follows.
He may be remembered as the Fed chair who closed the book on the post-2008 era of predictable inflation, near-zero rates and comfortable central-bank consensus.
Powell never looked like a classic modern Fed chairman. He did not have Ben Bernanke’s academic pedigree or Alan Greenspan’s cultivated mystique. He came across less as a professor than as a steady corporate director: practical, careful, and more interested in governing than in intellectual display.
He also changed the tone of the institution, pushing the Fed toward plain English and away from cryptic signalling. In an age of social media, populism and non-stop market scrutiny, opacity no longer looks like wisdom. It looks like evasion.
Donald Trump chose him, then quickly turned against him. As the Fed raised rates in 2018 and 2019, Trump openly attacked Powell and mused publicly about replacing him.
Powell’s response was one of the strongest parts of his tenure. He did not take the bait. He did not turn the Fed into a participant in a political feud. Instead, he kept returning to the institution’s mandate and independence. At a time when many American institutions looked brittle, the Fed looked steadier than it might have.
Then came Covid. In March 2020, the Fed faced something close to financial panic. Markets froze. Liquidity vanished. Powell responded with overwhelming force: rates went to zero, asset purchases resumed aggressively and emergency lending programmes spread across the financial system.
Critics later argued the central bank overdid it and in hindsight they are not entirely wrong. But in the spring of 2020, policymakers were not choosing between precision and excess. They were choosing between overreaction and possible collapse.
Powell made the correct call for that moment: first stop the panic, then worry about the cleanup.
No single word will haunt Powell’s record more than ‘transitory’. The Fed’s argument in 2021 was not absurd. For years, central bankers had lived in a world where inflation persistently undershot targets and disinflationary forces from globalisation and technology seemed durable.
But the Fed misjudged both the scale and persistence of the shock. Supply bottlenecks lasted longer, fiscal support was larger, labour markets tightened faster, and once businesses and households began to expect higher inflation, pricing behaviour changed.
When Powell finally pivoted, he pivoted hard, delivering the fastest tightening cycle in a generation and taking rates from near zero to above 5%.
Historically, the Fed does not bring inflation down from these levels painlessly. Something usually breaks. This time, the expected recession never fully materialised.
Consumers kept spending, employers kept hiring and corporate balance sheets held up better than many feared. Call it resilience, good luck or both. Either way, Powell’s Fed accomplished something rare: it brought inflation down meaningfully without producing a downturn severe enough to define the cycle.
This should not be romanticised. High rates punished interest-sensitive sectors. Lower-income households faced relentless pressure from rent, healthcare and financing costs. In that sense, the US economy under Powell became increasingly K-shaped: strong in the aggregate, harsher in lived experience.
Powell’s successor will inherit a much less forgiving world. Monetary policy now sits at the intersection of debt sustainability, industrial policy, national security and electoral pressure.
No one can say with confidence where the neutral interest rate really sits; the low-rate world of the 2010s may not be coming back. Inflation as measured by economists is not always inflation as experienced by households and any future Fed chair who ignores that gap will do so at their peril.
There are two easy ways to judge Powell and both are incomplete. The first is to say he failed because he misread inflation. He did misread it, and the mistake was costly. The second is to say he succeeded because he delivered a soft landing. So far, that looks broadly true.
He will leave behind a hard lesson: the age of easy central banking is over.
Christophe Boucher is CIO at ABN AMRO Investment Solutions. The views expressed above should not be taken as investment advice.