The man just won’t leave the stage.
Fed Chairman Jerome Powell announced last week that he’s going to remain on the Federal Reserve Board until 2028 even as he by law surrenders his chairmanship. The announcement came even after President Donald Trump agreed to drop his unwise lawsuit against Powell for funding a $2 billion new Taj Mahal building down the street from the White House.
Powell will be the first Fed chair to stay on the Fed’s Board of Directors in 50 years. This isn’t the way it’s done. It’s bad form.
Only once did he come within spitting distance of his inflation target. February 2021 was the only month in his whole tenure when inflation hit the range of 1.8% to 2.2%. He’s retiring with a batting average of .011.
Powell, in my opinion as a close Fed watcher, was one of Trump’s worst appointments, as his record proves. Trump agrees with me.
Two-thirds of the time, inflation was well above the target. Would you keep someone with that lousy record in your starting lineup?
He almost rammed the economy into recession with inexcusably high rates in 2018, and then during COVID-19’s aftermath he flooded the economy with cheap money. The inflation rate skyrocketed to 9% — its highest level since the late 1970s. We’re all still paying high grocery prices because of that monetary blunder. The Fed promised “transitory” inflation, but it was very high for two years.
He’s used interest rate policy seemingly as a weapon to bludgeon his enemy Trump. He slammed Trump’s tariffs publicly but refused to acknowledge the disinflationary effects of Trump’s tax cuts, energy policies and deregulation. He rarely, if ever, spoke out in opposition to the Biden post-COVID-19 $4 trillion debt-financed spending spree.
He finally relented in lowering rates in 2024, but that timing was suspicious coming a few months before the presidential election. Was he pushing his thumb on the scale to help former Vice President Kamala Harris win the election? You decide.
Powell never learned the supply-side truism that faster growth doesn’t cause inflation, it cures it. When the Fed gets that truism wrong, bad things follow. The Trump tax cuts and “drill, baby, drill” polices expanded economic output. More production means lower, not higher, prices. So why was he squeezing the money supply?
Powell has been emboldened and knighted by the media because of his public spats with Trump. He says he wants to be independent of politics, but no one has played their political cards against Trump more expertly and covertly than Powell.
His announcement to stay on the board can only be explained as pure political retaliation against Trump. It puts Kevin Warsh, Trump’s nominee to replace Powell, in an awkward position as he tries to drive the Fed back in the stable dollar direction. To stay and sit on the bench pouting is what sore losers do.
A CEO doesn’t stick around after they’ve been tossed out as chairman of the board — unless the successor pleads with them to stay. Warsh isn’t doing that. He has Powell’s mess to clean up.
Incidentally, with the news this weeks that the publicly traded debt now exceeds the annual GDP of the nation, perhaps Warsh should, in his inaugural address as Fed chairman, pledge to recommend that Congress live within its means, and that as a first step, he will cut the Fed budget and bureaucratic bloat by 10% to 15%.
What a great way to set a good example for the rest of Washington. We don’t need 300 Ph.D. economists at the Fed to screw things up.
Jerome can and should go home and write his memoir about how he attempted to undermine Trump every step of the way. It’s bound to be a bestseller.
Stephen Moore is a former Donald Trump senior economic adviser.