Jerome Powell was Chair of the Federal Reserve from February 2018 to May 2026. Of course, the Fed Chair does not have dictatorial power over setting monetary policy: instead, such policy is set by a vote of the 12-member Federal Open Market Committee, which in turn is made up of the seven DC-based members of the Fed Board of Governors and five presidents of the regional Federal Reserve banks (chosen on a rotating basis). However, the Chair does have, by tradition, position, and leadership, disproportionate influence over the monetary policies that are selected. How should Powell’s record as Chair be evaluated? Christina D. Romer and David H. Romer discuss “An early retrospective on monetary policy in the Powell era” (Hutchins Center Working Paper #106, Brookings Institution, June 2026).
Rather than trying to do a month-by-month or meeting-by-meeting evaluation, Romer and Romer quite sensibly focus six main episodes in monetary policy during Powell’s tenure as Chair:
We begin our study with a selective chronology of monetary policy since 2018. We don’t attempt to provide a comprehensive blow-by-blow description of Federal Reserve actions. Rather, we focus on what we see as six relatively distinct policy episodes. These are: (1) the interest rate and balance sheet normalization in 2018 and early 2019; (2) the reversal of both these policies in mid- and late-2019; (3) the aggressive expansionary response to the COVID 19 pandemic in 2020 and early 2021; (4) continued loose policy in 2021 as inflation surged; (5) the rapid tightening in 2022 and 2023 to fight inflation; and (6) the interest rate cuts starting in mid-2024 and severe threats to Fed independence.
This table shows the dates of the six episodes, along with the two main policy tools that the Fed was using during this time: changes in the federal funds interest rate (the specific interest rate that is targetted by the Fed) and changes in Fed holdings of securities–US Treasury bonds and mortgage-backed securities.
Here’s a figure showing the path of the target for the federal fund interest rate and for Fed holdings of securities over time. Remember that coming out of the Great Recession of 2007-09, the Fed was doing everything it could to support the economy, including a target interest rate set barely above zero percent and a willingness to hold $4 trillion in securities. Thus, when Powell is named Chair by President Trump in 2018, there is already a goal underway to move interest rates and Fed holdings of securities back to a more usual level.
The first two monetary episodes mentioned by Romer and Romer thus involve continuing the process of raising interest rates and gradually reducing Fed holdings of securities. However, in mid-2019, the Fed decided on a mild reversal of both policies. Romer and Romer write:
Attempts to shrink the Fed’s balance sheet, however, led to a temporary loss of interest rate control and a return to balance sheet expansion. The directional shift from interest rate hikes to cuts in mid-2019 can be understood as a response to slightly worse economic forecasts and a few low inflation readings, but it perhaps missed the more fundamental fact that unemployment was at historic lows.
Monetary policy is hard, and hindsight is 20:20. But as the charts above suggest, the monetary policy choices in 2018-2019 were first to raise interest rates by 1 percentage point, and then to cut them by .75 percent points. With Fed holdings of securities, the first step was to reduce holdings by $593 billion, while the second step was to raise them by $253 billion. These changes are not enormous ones, and they are overshadowed by the dramatic challenges of monetary policy that soon followed during the pandemic.
But as the Romers write about this time: “We see an increasing focus among FOMC members on theories that inflation was relatively impervious to economic conditions …” In other words, there was a belief that interest rates should just stay low, even when unemployment rates were also very low, because inflation was permanently under control. My own view is that these beliefs did not serve the Fed well during the period after the pandemic recession, and in some ways set the stage for Fed confrontations with the Trump administration in the last 18 months or so.
The pandemic recession hits in 2020. The Fed pulls out all the stops. Interest rates drop again to near-zero, and Fed holdings the US Treaury securities rises dramatically. There are also several severe strains in financial markets during this time, including a near-meltdown of the global market for US Treasury bonds in March 2020. Behind the scenes, “the Federal Reserve took aggressive actions to stabilize financial markets and ensure smooth market functioning.” This period (the third episode in the Romer and Romer chronology) is where Powell’s record as chair truly shines. The economic consequences of the pandemic are severe, but could have been so much more severe and longer-lasting without the Fed actions.
Conversely, the period right after the pandemic is the most controversial time for Powell’s legacy. Inflation rises, and the Fed was slow to respond, in part because members of the Fed continued to believe “that inflation was relatively impervious to a very strong labor market,” and that the surge of inflation would be only temporary. Romer and Romer note: “Mistaken forecasts that inflation would disappear quickly also factored into their policy choices. However, given that even the mistaken forecasts had inflation above target for an extended period and unemployment well below the natural rate, the decision to leave the funds rate unchanged for so long does not appear reasonable and had unfortunate consequences.”
In the fifth stage, the Fed finally acted to raise interest rates and reduce inflation, but the end result is that inflation remained above the target of 2% annual inflation since then. About this episode, Romer and Romer write:
It is very possible that the forceful moves and clear communication played a role in taming inflation, and did so with historically modest damage to the labor market. The gradual reduction in interest rates starting in mid-2024 was motivated by the Fed’s forecasts that it was closing in on both its inflation and maximum employment targets, and so could move toward its estimate of the neutral rate. However, similar to what we find for the 2019 cuts and the 2021 inflation forbearance, the FOMC arguably lost some sight of the bigger picture. In this case, the most important missing fundamental was simply that inflation had been well above target for years.
The final episode is the gradual interest rate cuts since 2024 and the pressure on Powell and the Fed from the Trump administration to cut rates faster. On one side, Powell has offered a strong defense of the independence of the Federal Reserve, despite sustained and very public personal and legal attacks. For this, he deserves considerable credit. But on the other side, the inflation rate has remained above the 2% annual target set by the Fed for several years now, while unemployment rates have been low by historical standards. Rather than keep interest rates at a higher level to drive out the remainder of inflation, the Fed has, albeit in a halting and episodic way, brought down interest rates and again started expanding Fed securities holdings.
Romer and Romer make no secret that their view is highly sympathetic to Powell; indeed, they note up front that they view him as a “hero.” My personal view toward Powell’s record is positive, but less so than that of the authors. My own sense is that Powell deserved considerable credit both for Fed actions to support the economy during the worst of the pandemic recession and also for his robust defense of Federal Reserve independence from President Trump. On the other side, it seems to me that the Fed under Powell has consistently leaned toward a belief that interest rates could be reduced or stay low with little or no risk of higher inflation: this was true in the 2019, in the aftermath of the pandemic recession, and again in the last 18 months or so. Moreover, one after-effect of the pandemic recession is that Fed holdings of securities, which were already viewed as too high when Powell assumed the Chair, are markedly higher now. Thus, in sustaining the inflation-fighting credibility of the Fed and also in how the Fed has become intertwined with US budget deficits by holding larger amounts of US Treasury securities, Powell’s two terms as Chair of the Fed have left some real challenges for his successor.
