WASHINGTON — The week begins with a new chairman of the Federal Reserve, after Jerome Powell stepped down Friday after eight years as chairman, ending a tenure defined by the COVID-19 pandemic, the highest inflation surge in four decades and repeated clashes over the independence of the nation’s central bank. His successor, former Federal Reserve governor Kevin Warsh, now takes over at a time of renewed inflation concerns and heightened political scrutiny of the Fed.
Powell was first nominated by President Donald Trump in 2017 and later reappointed by President Joe Biden, led the Fed through some of the most turbulent economic conditions since the 2008 financial crisis.
During the pandemic in 2020, the Fed slashed interest rates to near zero, launched massive bond-buying programs and created emergency lending facilities to stabilize financial markets and support the economy. Economists widely credited those actions with helping produce a rapid recovery from the brief, but severe recession triggered by COVID-19.
But Powell’s legacy was also shaped by the inflation outbreak that followed. Prices surged after the pandemic, peaking at 9.1% in 2022, after Fed officials — including Powell — initially described inflation pressures as “transitory.” Critics argued the Fed waited too long to begin tightening monetary policy.
Fast-Paced Increases
The Fed later responded with one of the fastest series of interest-rate increases in modern history. By 2024, inflation had cooled substantially without pushing the U.S. economy into recession, an outcome many economists described as a rare “soft landing.”
Powell also became a central figure in debates over Fed independence. Trump frequently criticized Powell during both administrations and repeatedly pressured the Fed to cut rates more aggressively. More recently, Powell faced investigations tied to renovation costs at Federal Reserve buildings, inquiries that supporters said were politically motivated. The Justice Department later dropped the probe.
Despite stepping down as chair, Powell is expected to remain on the Federal Reserve Board through 2028, preserving a continuing voice in monetary policy discussions.
What Walsh Inherits
Warsh, 56, was confirmed by the Senate this week in a largely party-line vote. A former Fed governor from 2006 to 2011 and a former Wall Street executive, Warsh inherits a central bank facing persistent inflation pressures, global geopolitical instability and questions about the Fed’s future direction.
Warsh has signaled he intends to pursue significant reforms at the central bank, including reassessing the Fed’s inflation framework, reducing reliance on large-scale asset purchases and increasing transparency. During his confirmation hearing, he pledged to maintain the Fed’s independence despite Democratic concerns that he could be too closely aligned with Trump.
A ‘Sock Puppet’
His confirmation marked one of the most politically contentious Fed leadership transitions in decades. Sen. Elizabeth Warren (D-MA) called Warsh a potential “sock puppet” for Trump, while supporters argued his prior Fed experience and market credibility made him well suited for the role
