Jay Powell is an honourable and intelligent man. He has handled the political side of being Federal Reserve chair — particularly relations with Congress — with skill and impartiality. Above all, he has stood up to vindictive abuse from Donald Trump, the man who appointed him, only to label him a “moron” for the crime of doing his job. The president’s poodles at the Department of Justice even opened an absurd criminal investigation into Powell. He is indeed one of the few people to emerge from the experience of working with Trump untainted. The fact that he plans to remain on the Fed’s board under his successor, Kevin Warsh, is encouraging, since the next few years are likely to be challenging indeed for US monetary stability.
Unlike Arthur Burns, Fed chair under Richard Nixon, Powell stood up to the bully. That is admirable. Unfortunately, he has faced other challenges that have, arguably, not been handled quite so well. The most important was the disruption caused by the Covid-19 pandemic. The Fed, like other central banks, failed to keep inflation at 2 per cent a year. Some argue that, given the scale of that disruption, what happened was the least bad outcome. But in March 2026 the US personal consumption expenditures price index was 10.4 per cent higher than it would have been if the Fed had hit its 2 per cent annual target from January 2020 onwards. This was rightly hated by voters.
From this experience, it is rational for people to conclude that over time the 2 per cent target will be exceeded. That is because central banks will allow prices to rise permanently above the levels implied by the inflation target in response to a big shock. But they will work far harder to prevent it from falling consistently below that level.