Powell’s Fed – Jerome Powell’s eight-year tenure ends Friday as President Donald Trump’s incoming Fed chair nominee Kevin Warsh takes over, with the central bank facing renewed inflation pressure, a politically charged renovation probe, and a broader fight over the Fed’s ind
Jerome Powell has spent his final months at the Federal Reserve navigating crises that reshaped everyday life. from a pandemic-driven employment collapse to the worst inflation surge in decades.. Now. as he prepares to step down Friday. the question facing Washington is what the Fed does next after a tenure that repeatedly collided with politics.
Powell’s term ends as President Donald Trump’s Fed chair nominee, Kevin Warsh, is set to take the helm. Warsh will inherit an economy that looks resilient in some measures, but one also grappling with a renewed bout of inflation.
Powell said last month he would take an unusual step by staying on the Fed’s 12-person board of governors after his chair term expires.. The move keeps him involved in interest-rate policy until 2028. though he said he would step down once a Fed inspector general investigation into a renovation of the Fed’s headquarters is closed.
That renovation probe has become one of the defining flashpoints of Powell’s final stretch as chair.. In January. the Department of Justice opened a criminal investigation into Powell. escalating what became an extraordinary showdown between the White House and the central bank.. It was the first criminal probe of a Fed chair in the Fed’s 113-year history.
The investigation centered on Powell’s testimony to Congress last year about cost overruns tied to the building renovation.. Powell issued a rare video message rebuking the inquiry as politically motivated. saying. “No one — certainly not the chair of the Federal Reserve — is above the law.. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
Trump had previously denied any involvement in the criminal investigation.. Last month, the DOJ moved to drop the probe, with Washington U.S.. Attorney Jeaninne Pirro saying the matter would instead be taken up by the Fed’s inspector general.. Pirro described the decision as shifting the renovation investigation away from the criminal track.
Rebel Cole, a professor of finance at Florida Atlantic University and a former Fed official, said Powell “stood up” to what he called the “attack on the Fed chair,” telling ABC News: “The attack on the Fed chair was appalling.”
Powell’s tenure began in 2018, when the economy was humming: unemployment was at a historically low level and inflation sat just above the Fed’s 2% target. Trump had nominated Powell, describing him as a “consensus builder” who “understands what it takes for our economy to grow.”
But Powell’s leadership was soon tested by events that left little room for a steady policy path. Four rate hikes in his first year strained markets, even as the Fed retained the ability to cut rates if a slowdown emerged. When COVID-19 hit, the pace of decision-making changed dramatically.
In March 2020. at an emergency meeting. Powell slashed interest rates to near-zero levels in an effort to stimulate a battered economy.. “Families, businesses, schools, organizations, and governments at all levels are taking steps to protect people’s health.. These measures. which are essential for containing the outbreak. will nonetheless understandably take a toll on economic activity in the near term. ” Powell told reporters at the time.
The jobs numbers reflected the shock.. The unemployment rate rose from 4.4% in March to 14.7% in April, according to U.S.. Bureau of Labor Statistics data.. A swift recovery followed, helped by economic stimulus enacted by Trump and President Joe Biden, alongside low interest rates.. The downturn lasted only two months, making it the shortest recession in U.S.. history, according to the National Bureau of Economic Research.
Former Fed vice chairman Alan Blinder, a professor at Princeton University, described the rate cuts as “necessary and appropriate.” He added to ABC News: “The dropping of rates to the floor was both necessary and appropriate, and in a real sense, obvious.”
But the recovery was soon overtaken by inflation. Price spikes emerged from pandemic-related supply disruptions and were exacerbated by the Russia-Ukraine war. Powell initially downplayed the increases as “transitory,” a stance he later acknowledged as a mistake.
Inflation hit a 40-year high of 9.1% in June 2022, and Powell’s policy shifted toward tightening.. By the time of the aggressive rate-hike series, the Fed’s benchmark rate reached its highest level since 2001.. The result was felt quickly in everyday borrowing costs, with mortgage and credit card rates rising.
By June 2023, annual inflation had fallen to 3%. Still, many Americans remained frustrated long after. Some economists had forecast a recession and major job losses, but the feared downturn did not arrive.
Edelberg of the Hamilton Project said, “Inflation stayed high for too long but once it came down, it came down really fast. It came down without creating unnecessary pain in the labor market.”
As Powell’s chairmanship moved into its later years, politics returned to the center of the story.. In September 2024, less than two months before the presidential election, the Fed cut interest rates by 0.5%.. The decision drew criticism from allies of Trump, who saw it as a potential boost for Democrats.. Trump went on to win.
After returning to the White House in early 2025, Trump urged Powell to cut rates, and the public attacks intensified.. Over the following months. Trump also criticized Powell over cost overruns tied to the renovation of the Fed’s headquarters in Washington. D.C.. Last July. Trump made the first official trip to the Fed by a sitting president in nearly 20 years. touring the renovation wearing a hard hat alongside Powell.
The Fed said the spending overruns were driven by unforeseen cost increases, adding that the renovation would “reduce costs over time by allowing the Board to consolidate most of its operations,” according to the central bank’s website.
Now, with Powell stepping aside, Warsh faces his own test. Inflation has risen again, with the U.S.-Israeli war with Iran continuing to send fuel prices higher. Government data released Tuesday showed annual inflation jumped to its highest level in three years.
At the same time, the labor market has held up. The unemployment rate stayed at 4.3% in April, a historically low level that left it little changed from when Powell began his tenure in 2018.
Blinder said the economy is “pretty good but far from perfect. ” faulting Powell in part for elevated inflation while attributing much of the problem to the Iran war.. Even as he criticized elements of Powell’s inflation record, Blinder praised the chair’s commitment to Fed independence.. “That’s the legacy that Warsh is inheriting,” he said.
Jerome Powell Federal Reserve Kevin Warsh interest rates inflation DOJ investigation Fed renovation unemployment rate Trump Fed independence national economy