Jerome Powell’s legacy as Fed chairman and impact on the central bank : NPR

MICHEL MARTIN, HOST:

We wanted to learn more about Jerome Powell’s legacy as Chairman of the Federal Reserve, his impact on the institution as well as monetary policy, which is why we called Alan Blinder. He served as vice chairman of the Fed from 1994 to 1996. He was a member of President Bill Clinton’s Council of Economic Advisers and is a professor of economics and public affairs at Princeton. Professor Blinder, welcome back. Thank you for joining us once again.

ALAN BLINDER: Well, nice to be with you, Michel.

MARTIN: So let me start with the news that, as we just learned, Jerome Powell will remain governor of the Federal Reserve for a period to be determined in response to attacks from the White House and the Justice Department. So first, what do you think of his decision to stay? And overall, how do you think he responded to these attacks, which sometimes became very personal?

BLINDER: Well, this decision is sort of the cornerstone or the final episode of his legacy, which will surely be one of defending the independence of the Fed. To your question, I applaud his decision. He’s not going to stay forever. I doubt he will stay until the end of his term in 2028. But he will stay – I paraphrase what he said – until he sees that the ship is moving forward and not sinking.

MARTIN: He said he was concerned that the attacks would, quote, “undermine this institution and endanger the things that really matter to the public,” unquote. And his use of the present tense sort of suggests that he thinks the attacks on the Fed aren’t over. Like, what about you?

BLINDER: I don’t think they’re finished either. I mean, you will have it now: a Federal Open Market Committee, in due course, will be led by Kevin Warsh, and he is qualified for this position. If he doesn’t get too much interference from the White House or if he doesn’t listen to the interference from the White House that he gets, which is what Powell was doing, he’ll be fine. But if he becomes a parrot for Donald Trump, there will be problems within the Federal Open Market Committee and the Fed in general.

MARTIN: So let’s look more broadly at Mr. Powell’s tenure. He has been through a number of crises – the pandemic…

BLINDER: He did.

MARTIN: …The trade wars, the current war with the Middle East. Obviously, there is so much to say. And there will probably be, you know, books written about his tenure, given all of that. But how do you rate his tenure as head of the Fed, as briefly as possible?

BLINDER: I think he was great. And the reason I say that is primarily what I was talking about earlier: he had an extreme need to defend the independence of the Fed. I served at the Fed with Alan Greenspan, who served for over 18 years. He never really had to defend the independence of the Fed. But for Jay Powell, that has unfortunately been the main part of his job description.

MARTIN: Some critics point out that the Fed kept interest rates low as the economy emerged from the pandemic, expecting transitory inflation that turned out not to be the case. Do you consider this a misstep? And how does that fit into his tenure as president?

BLINDER: It was a mistake. I consider – and Powell said this. I consider this a forgivable mistake, given what we experienced, the fact that the economy was still far from booming and – this is important – the fact that at the time almost everyone underestimated inflation. Almost no one told you this, fearing out loud that the Consumer Price Index inflation rate would reach 9%.

MARTIN: Before we let you go, maybe you don’t consider that kind of part of your portfolio, but I’m curious if you have an opinion on how you think the public – what do you think the public’s confidence is in the Fed today?

BLINDER: I think it’s been damaged by Mr. Trump’s incessant attacks. I mean, he used all kinds of derogatory terms to describe Powell. A lot of people are going to look at this and say, oh, there’s President Trump again. He does this all the time. But some will take the issue more seriously. And that’s not a good look for any branch of government, least of all the Fed, which is supposed to be independent and make decisions in the public interest.

MARTIN: So do you think that’s something Mr. Warsh needs to pay attention to: public confidence in the Fed as part of its portfolio?

BLINDER: Oh, yes. I think it’s – I wouldn’t say it’s been broken, but it’s taken down a few notches from a high level to a much lower level. And one of his tasks will be to restore that. And a big part of that job is how he handles the evolving relationship between him and the president of the United States.

MARTIN: This is Alan Blinder. He is a former vice chairman of the Federal Reserve. He is currently a professor at Princeton. Professor Blinder, thank you very much for speaking with us.

BLINDER: You’re welcome.

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