Jerome Powell has been a political player for years and his less than stellar record as Fed chair is evidence of his gamesmanship.
The Consumer Price Index (CPI) was at 1.4% when Joe Biden took office as president in January 2021. It then spiked, crossing over the long-standing maximum target of 2.0% to rise to 2.6% in March 2021. The CPI continued its precipitous rise until peaking at 9.1% in June 2022. The Biden administration called inflation “transitory” during this rising period and blamed it on the pandemic, supply chain disruptions, the Ukraine war, corporate greed, and anything else they could conjure up rather than the fact that the main cause was excessive spending by Biden and the Democrats. Powell, wanting to be renominated as Fed chair and knowing that Biden wanted interest rates to remain low to further stimulate an already overheated economy, parroted the propaganda-based transitory position. This resulted in the Federal Funds Rate (FFR) not being increased to any significant degree by the Fed until June 2022, more than a year after the CPI crossed the maximum 2.0% target in March 2021. Why did Powell during this critical period fall in line with the position that inflation was transitory, take little to no action with respect to the FFR, and ignore the obvious cause of excessive spending as the primary reason for the rise in the CPI? Simple. Powell was playing politics and wanted Biden’s support to secure him a second term as Fed chair.
Showing Powell’s political bias toward the Democratic party and against Donald Trump in the leadup to the November 2024 election, the FFR was decreased by 0.5% in September 2024 in an attempt to energize the economy and help Kamala Harris. Notice that the rate decrease was a full 0.5% and not the more conservative position of 0.25% that may have been anticipated. In addition, the CPI was at 2.4% in September 2024, still well above the desired 2.0% maximum target. The CPI increased to 2.6% in October 2024, 2.7% in November 2024, 2.9% in December 2024 and 3.0% in January 2025 when Trump took office, supporting the position that the Fed had not defeated the inflation existing under the Biden economy.
After the election, the Fed decreased the FFR by an additional 0.25% in November 2024 and followed that with another 0.25% in December of 2024, both of which I believe were done as cover for their politically motivated and ill-advised FFR cut prior to the election. It is clear that the Fed did not have inflation under control. Fortunately, the CPI fell to 2.8% in February 2025, continued its downward trend to 2.4% in March 2025, and fell further to 2.3% in April 2025 (before a less than expected and slight uptick to 2.4% in May 2025, which some might attribute in part to Trump’s imposition of tariffs to fight trade imbalances), due in no part to the actions of the Powell-led Fed, but interestingly aligning perfectly with Trump’s ascension to the presidency and the start of the implementation of his policies. Powell and the Fed should not have been adjusting the FFR in the runup to the election, as this made it look like the Fed was trying to impact the election. In addition, it being clear that inflation was still a problem, Powell and the Fed should have taken no action until after the election. This would have allowed the Fed to keep its powder dry in terms of the FFR and given them greater latitude to address the economy as impacted by the actions of Trump in 2025.
To make matters worse for Trump, Powell’s term as Fed chair does not end until May 15, 2026, and it is debatable whether Trump as president has the legal authority to remove Powell from his post prior to the end of his term as head of the Fed. This means that Powell will be able to take positions contrary to those of Trump well into the second year of his presidency, a period in which the Republicans control the House and Senate, and are well positioned to take significant actions.
As Trump addresses the economy through the imposition of tariffs, reduced, regulations and his hoped-for tax reforms, all areas in which he has some degree of control, it is important that the Fed, an independent body, takes actions that are in concert.
I believe that the politically motivated Powell will continue to be a thorn in the side of Trump and the Republicans, as well as working against the best interests of the country.
In summation, we must consider the facts and not be fooled by the fiction.
Perry V. Kalajian is an attorney, consultant, analyst, and national television personality.
Image: Federal Reserve