"The Fed was late to react as prices started rising when the Covid pandemic abated, but they eventually acted forcefully and achieved the most rare of feats: a soft landing, curbing inflation without sparking a recession or damaging employment."
"Powell's most lasting accomplishment will most likely be his outspoken efforts to defend the independence of the Fed from an assault by the imperial presidency of Donald Trump. That job, unfortunately, is not done. The chair managed the president smoothly, ignoring his demands to slash interest rates at every turn."
"When Trump went for the jugular, threatening to indict Powell over the spurious charge of lying to Congress about the cost of refurbishing the Fed's headquarters, he pushed back, refusing to step down and publicly condemning Trump's real motivation: payback."
"Even if Kevin Warsh, Trump's pick to replace Powell, proves to be the president's sock puppet, eager to cut rates regardless of mounting fears of higher inflation, he is unlikely to convince most of the 11 other members of the federal open markets committee, only two of which are Trump appointees. But the Fed is not safe."
Prices rose after the Covid pandemic abated, and the Fed initially reacted late. Monetary policy later tightened forcefully and achieved a rare outcome by reducing inflation without triggering a recession or harming employment. The period also included pandemic disruption and tariffs, so monetary policy may not be the defining legacy. The most lasting accomplishment is defending the Fed’s independence from political pressure. Powell resisted demands to cut interest rates and refused to step down when Trump threatened legal action over alleged misstatements to Congress. He publicly condemned the motivation as payback. Even if a successor aligned with Trump is chosen, most committee members are unlikely to follow rate cuts that risk higher inflation. The Fed remains vulnerable because broader legal and political mechanisms could still be used to subjugate it.
Read at www.theguardian.com
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