In 2020, the market crashed, and the Federal Reserve intervened to save it; in 2022, rampant inflation drove the Federal Reserve to raise interest rates at the fastest pace in forty years; in 2023, the collapse of Silicon Valley Bank prompted an emergency response from the Federal Reserve; from 2025, the president applied pressure, criminal investigations began, and threats of dismissal—Powell withstood it all. Over eight years, the Federal Reserve was repeatedly pushed to its limits.

Source: Jin Shi Data

In the past few years, Powell would pass by a portrait of Arthur Burns on his way to the office and silently tell him: I will not become you.

Burns was the Federal Reserve chairman during Richard Nixon's presidency, and his failures were twofold: he allowed inflation to spiral out of control, and he succumbed to a president who demanded low interest rates.

During his eight years as chairman, Powell faced both of these risks—inflation and presidential pressure, among others. The Federal Reserve received widespread acclaim for its innovative pandemic response, but also bore some responsibility for the subsequent high prices, and successfully reduced inflation without triggering a recession, defying many predictions. Subsequently, Powell endured the longest political assaults in modern Federal Reserve history.

“This might be the most challenging time for a central bank president since the Federal Reserve's inception,” said Daleep Singh, who led the market division of the New York Federal Reserve in 2020.

As Powell's term comes to an end, political judgments are still being debated, and economic conclusions remain contentious. Even before the outbreak of the Iran war, inflation was still nearly a percentage point above the Federal Reserve's 2% target.

Under Powell's leadership, the Federal Reserve dared to take bold actions. During the COVID-19 pandemic, he lowered interest rates to zero, pushed the Federal Reserve's operational scope to its limits, and expanded lending to economic sectors the central bank had never touched.

Then, as inflation surged, he raised interest rates at the fastest pace in forty years. But at other times, Powell refused to act: when economists urged the Federal Reserve to create a recession to curb inflation, and when Trump pressured him to cut interest rates further at a time when prices faced the risk of rising again.

Powell handed over an institution to his successor Kevin Warsh that he had tried to distance from partisan struggles. After this effort failed, he focused on preventing these struggles from changing the Federal Reserve's culture of analytical rigor and evidence-based decision-making. This battle continues, which also explains why the 73-year-old Powell will stay on the Federal Reserve Board—making him the first former chairman to do so in 75 years.

Nick Timiraos, the chief economic reporter for The Wall Street Journal, known as the "Fed's mouthpiece," wrote a summary of how eight years of turmoil pushed Powell and the Federal Reserve to their limits, stating that the pandemic, inflation, and White House pressures uniquely tested this central bank leader.

Pandemic Shocks Global Markets

The pandemic arrived first. In March 2020, as global markets ground to a halt and the U.S. Treasury market began to malfunction, Powell and his colleagues hurriedly unveiled unprecedented emergency plans. That spring, scenarios envisioned within the Federal Reserve included a "depression" path—unemployment reaching nearly 20% within a year.

Powell told his colleagues it felt like chasing a speedboat—giving it their all yet still lagging behind. By the end of the month, after lowering interest rates to zero, they began purchasing Treasury and mortgage-backed securities on an unprecedented scale. The Federal Reserve made its first direct loans to corporations, municipalities, and medium-sized businesses.

"I was still thinking about a market possibly not opening while I was trying to sleep, and then at eleven o'clock, there's a new plan," said Ajay Rajadhyaksha, head of global research at Barclays. "The next morning, if it didn't work, the scale would be increased."

For several plans, just announcing them was sufficient. Once the market knew the Federal Reserve would stand behind them, the previously panicked market recovered. Even Trump, who had spent a year venting frustratedly at his appointment of Powell as Federal Reserve chair, called to congratulate Powell, referring to him as "my best improvement player."

Powell later described those most agonizing weeks. In an interview in 2021, he said: "You felt bad every minute. You were exhausted, couldn't sleep; it was just a bad feeling. You better get it right."

Betting on "Transitory" Inflation

Getting it right became more challenging. By mid-2021, as vaccinations encouraged Americans to go out after a year of pandemic restrictions, prices began to rise at unprecedented rates. At that time, the Federal Reserve’s belief that inflation surges would be "transitory" was widely accepted by economists. But looking back, fully opening the monetary faucet became Powell's biggest mistake during his term.

Officials placed a bet: inflation was a problem brought on by the reopening of society and would resolve itself. Supply chain bottlenecks would ease; demand from the pandemic would stabilize.

They had their reasons. "We didn't do enough during the global financial crisis, so this time we went overboard," said Patrick Harker, former president of the Philadelphia Federal Reserve, who left office in June last year.

To make matters worse, Powell and his colleagues had just adopted an entirely new overarching strategy, which had been designed to address the issues of the previous decade—long-term economic weakness. This strategy did not foresee the $1.9 trillion stimulus plan that Biden launched in March 2021.

John Cochrane, an economist at the Hoover Institution at Stanford University, stated that this framework proved to be "a carefully constructed Maginot Line against what was seen as an endless deflation threat." In his view, a central bank that had just established defenses against one threat found itself utterly unable to recognize another when it came.

Soft Landing

This bet broke in November 2021—the same month Biden reappointed Powell. Consumer prices accelerated. A few months later, the Russia-Ukraine conflict broke out, pushing inflation to a forty-year high.

Powell spent the next two years correcting his misjudgment. To combat inflation, the Federal Reserve raised interest rates at the fastest pace in forty years. Just weeks after Powell had ruled out the possibility of raising rates by 75 basis points, the Federal Reserve went ahead and did so—followed by three more rate hikes.

In August 2022, at the Federal Reserve's annual symposium in Jackson Hole, Wyoming, Powell delivered an eight-minute speech quoting Paul Volcker, warning that the process of lowering inflation could involve "pain."

At the evening reception, a country band was playing. Powell, who would usually dance in earlier years, sat this time. He told a colleague, "After a speech like that, you can't dance."

Nevertheless, Powell refused to give up on the idea of a soft landing—lowering inflation without triggering a recession. That fall, during a Q&A session after a speech, he dismissed the "deterrence and intimidation" framework proposed by JPMorgan economist Michael Feroli, who advocated for more aggressive rate hikes.

"We are not just going to raise rates, try to collapse the economy, and then clean up the mess," Powell said.

The dramatic fluctuations in interest rates came at a significant cost. Higher rates doomed the functioning of the housing market. Homeowners who refinanced at low rates during the pandemic were unwilling to move; potential buyers could not afford the homes on the market.

The rate hike cycle also put pressure on banks heavily holding long-term Treasury bonds when yields were near zero. In March 2023, this pressure finally exploded. Silicon Valley Bank (SVB), a regional bank holding many such bonds, collapsed—the largest bank failure since 2008.

Other banks began to wobble. The Federal Reserve and Treasury quickly acted to contain the panic.

The Silicon Valley Bank incident marked the second major stain on Powell's leadership of the Federal Reserve—this time occurring within a post-2008 rebuilt regulatory system.