Jerome Powell’s Last Stand at the Fed

Summary

The Journal. | “Jerome Powell’s Last Stand at the Fed” Air date: May 14, 2026
Hosts: Jessica Mendoza & Ryan Knutson
Reporter: Nick Timoros

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Episode Overview

This episode examines Jerome Powell’s unexpected decision to remain on the Federal Reserve Board after stepping down as Chair, a break from decades of precedent. Through interviews and analysis, WSJ’s Nick Timoros and host Jessica Mendoza explore the unprecedented political pressure the Fed faces, the breakdown in presidential relations, Powell’s leadership style, and the implications for central bank independence. The episode traces Powell’s legacy, his tense relationship with multiple presidents, and the stakes for the future of U.S. monetary policy.

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Powell’s Planned Retirement & Sudden Turnaround

• Powell’s Expected Exit:

  • Powell was widely expected to retire quietly after eight years as Fed Chair, planning a peaceful life of “golf, guitar, philanthropy, time with grandkids, maybe a memoir” [00:19, Nick Timoros].
  • “Less monetary policy, more Hank Williams.” [00:37, Jessica Mendoza]

• Breaking with 75 Years of Tradition:

  • Just before his planned departure, Powell announced that while he was stepping down as Chair, he would remain as a Fed Governor indefinitely.
    • “After my term as Chair ends on May 15, I will continue to serve as a governor for a period of time to be determined.” [01:16, Jerome Powell]

• Immediate Backlash:

  • Critics accused Powell of violating Fed norms:
    • “[This] is a violation of all Federal Reserve norms. If you believe in the independence of the Fed, then Jay Powell himself needs to leave.” [01:28, Nick Timoros and others]
  • Powell insisted recent events left him “no choice but to stay until I see them [through].” [01:39, Powell]

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Powell’s Leadership Style & Relationship Building

• Unique Listening Skills:

  • Powell is known for his “knack for repeating sentences backwards”—a sign of his deep listening. [04:12, Nick Timoros]
    • “His superpower has been his listening… He’s in listen mode.” [04:28, Timoros]
  • He prioritized wearing out “the carpets of Capitol Hill… walking those halls and meeting with members” [04:54, Powell], building political relationships he knew would matter during a crisis.

• Breakdown with President Trump:

  • Strain developed soon after Trump appointed Powell in 2018, particularly after the Fed raised rates to cool the economy.
    • “By the end of the year, Trump hated it. And in December… Trump was talking about firing him.” [05:46, Timoros]
  • Legal limits prevent presidents from firing Fed Governors without cause. [06:00, Timoros]

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Crisis Management & Policy Mistakes

• The Pandemic Response (2020):

  • The Fed slashed interest rates, launched unprecedented lending programs, and Powell was credited with stabilizing the economy.
    • “A lot of people in markets will tell you that was really the high point of the Powell Fed.” [06:57, Timoros]
    • “He was widely credited with not just saving the economy, but avoiding much worse outcomes.” [06:57, Timoros]
  • Even Trump voiced rare praise:
    • “In many ways I call him my mip… Most improved player.” [07:15, Trump]

• Inflation Miss & Rate Hikes:

  • Fed's mistake: Misreading post-pandemic inflation as “transitory,” keeping rates too low for too long.
    • “2021 is where the mistakes start… The Fed keeps saying this is transitory.” [07:49, Timoros]
    • “But they didn’t.” [08:10, Timoros]
  • When reality set in, the Fed hiked rates dramatically—the fastest pace in four decades. [08:18–08:35]
  • Political fallout ensued, eroding the Fed’s perceived independence. [08:48, Timoros]
    • “It made the institution more vulnerable. It left the Fed politically exposed.” [08:48, Timoros]

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Intensifying Political Pressure & Legal Battles

• Return of Trump, Direct Attacks:

  • Trump, re-elected in 2025, immediately resumed confrontation with Powell:
    • Attempted to fire Powell; then targeted other board members (notably Lisa Cook) with questionable allegations. [09:32–10:15]
  • The limits of presidential power over the Fed Board are now before the Supreme Court. [10:15]

• Criminal Probe into Powell:

  • The Justice Department opened—and later dropped—a criminal investigation into Powell, seen as politically motivated.
    • “That’s a line that crosses beyond anything we’ve seen up until then.” [10:31, Timoros]
    • “This unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.” [10:36, Statement]

• Powell’s Calculus for Staying:

  • The probe and political attacks convinced Powell he couldn’t in “good conscience” leave, believing his presence acted as a “firewall” for Fed independence.
    • “It did the opposite of what it may have been intended to do… It told him, there’s a storm outside the building right now. You cannot in good conscience leave now.” [11:57, Timoros]

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Implications of Powell Staying

• Awkward Dynamics on the Board:

  • As governor, Powell will serve alongside his successor, Kevin Warsh, whom Trump publicly supported and who criticized Powell’s record.
    • “It is going to be awkward… Kevin Warsh got the job after a fairly pointed public campaign highlighting all the ways he believed the Fed had screwed up under Powell. And now the person he criticized is going to be sitting at the same table.” [14:37, Timoros]

• Control of the Board’s Balance:

  • Powell’s staying denies Trump an additional seat:
    • “Currently, those seven seats are evenly split… If Powell leaves, that seventh seat opens up.” [15:04–15:14, Mendoza]
    • “It’s about what his presence prevents… One of the concerns… is a clear erosion of what we call Fed independence.” [15:26, Timoros]

• Erosion of Consensus:

  • Warsh wants “messier Fed meetings and… a good family fight.” [17:19, Mendoza]
    • At the last meeting, four members dissented—an unusual show of division signaling less “groupthink” but more potential confusion. [17:19, Mendoza]
    • “Instead of one signal, you’re going to have a chorus… and volatility…” [17:54, Timoros]

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The Economic Stakes and the Fed’s Future

• Rising Inflation, No Rate Cuts:

  • New inflation data (fueled by energy prices and war with Iran) rules out rate cuts for now. [18:31]
    • “Rate cuts are off the table for now. Inflation is moving in the wrong direction…” [18:51, Timoros]
  • The White House may be frustrated, as the Fed won’t act as wished.

• Powell’s Legacy:

  • Mendoza asks what will define his legacy:
    • “When his professional obituary is eventually written… he will be remembered as the chair who challenged a president’s attempt to control monetary policy. And he repelled it.” [19:39, Timoros]
    • “If Fed independence survives, his legacy could look quite favorable. If it doesn’t, he will be able to say he did everything the law allowed him to do.” [19:39, Timoros]

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Notable Quotes & Memorable Moments

• “Our job is to meet the tests we are presented.” — Jerome Powell [06:30]
• “I’m going to wear the carpets of Capitol Hill out…” — Jerome Powell [04:54]
• “If Trump had backed off, it seems likely that Powell would have done what every fed chair since 1970 has done, which is to leave when his or her term ends. That’s the modern norm.” — Nick Timoros [11:57]
• Physical comedy moment: When asked how he’ll keep a low profile as governor, Powell literally lowers himself in his chair, “like a turtle… sinking into his shell,” drawing laughter. — Recap [13:45–14:14]
• “This is about protecting the institution, or at least making sure that when he does go, it doesn’t lead to even a bigger fracture.” — Nick Timoros [16:34]
• “If you have a committee that’s openly split… that means that instead of one signal, you’re going to have a chorus… and volatility…” — Nick Timoros [17:54]
• “He will be remembered as the chair who challenged a president’s attempt to control monetary policy. And he repelled it.” — Nick Timoros [19:39]

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Key Segment Timestamps

• 00:05–01:20: Powell’s planned retirement interrupted by decision to stay as Governor
• 04:12–05:14: Powell’s listening skills and approach to building relations
• 05:14–06:57: Powell’s relationship with Trump and early Fed challenges
• 07:15–09:05: Pandemic, inflation, and policy missteps
• 09:32–11:57: Return of Trump, ongoing political pressure, criminal investigation
• 13:27–15:26: The awkward boardroom dynamics and Powell’s role
• 16:05–17:54: Fed independence at stake, board consensus breaks down
• 18:31–19:11: Economic context—no rate cuts amid rising inflation
• 19:20–20:19: Assessing Powell’s legacy

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Recap

The episode offers an inside look at Powell’s extraordinary holdover and the seismic forces buffeting the Fed: political warfare, institutional tradition, and the struggle for independent U.S. monetary policy. Through crisp reporting and revealing anecdotes, The Journal underscores Powell’s legacy as a bulwark—however awkward—against political encroachment, and the precarious guardrails of American economic governance.

Transcript

[Jessica Mendoza]

Jerome Powell was supposed to retire quietly. The way our colleague Nick Timoros tells it, Powell's life after eight years leading the Fed was supposed to be simple.

[Nick Timoros]

Friends will tell you the picture. Golf, guitar, philanthropy, time with grandkids, maybe a memoir. Somewhere down the line. Everybody has their way. Relief, stress. And Powell's is to play the guitar. Hank Williams ballads.

[Jessica Mendoza]

Less monetary policy, more Hank Williams. That was the exit plan. And tomorrow was set to be Powell's last day as a newly confirmed Fed chair.

[Nick Timoros]

Takes the reins from people I've talked to. He was genuinely looking forward to it. He was counting down the days.

[Jessica Mendoza]

But just weeks before that exit.

[Jerome Powell]

This is my last press conference as chair and I will close with a few thoughts.

[Jessica Mendoza]

Powell had an announcement he would step down as chair, but in a break from more than 75 years of Fed tradition, he would not leave the Fed.

[Jerome Powell]

After my term as Chair ends on May 15, I will continue to serve as a governor for a period of

[Jessica Mendoza]

time to be determined almost immediately. Critics pounced.

[Nick Timoros]

This is a violation of all Federal Reserve norms. If you believe in the independence of

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the Fed, then Jay Powell himself needs to leave.

[Jessica Mendoza]

But Powell said he saw no other option.

[Jerome Powell]

I had long planned to be retiring and you know, the things that have happened in really in the last three months have I think, left me no choice but to stay until I see them.

[Nick Timoros]

He said he felt like he had no choice and I read that as this is the last card he could play and he doesn't think that he can walk away from the job. While the relationship between the Federal Reserve and the executive branch is in as bad a state as it is, this is about protecting the institution.

[Jessica Mendoza]

Welcome to the Journal, our show about money, business and power. I'm Jessica mendoza. It's Thursday, May 14th. Coming up on the show, why jerome powell just can't quit the fed.

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[Jessica Mendoza]

Nick Timoros has been covering Jerome Powell and the Fed for nearly a decade. He talks regularly with people who work closely with Powell and people who know him personally. That's given Nick a sense of how Powell thinks. One thing that's always stuck with Nick, an unusual talent that actually tells us a lot about Powell's leadership style. I asked Nick about it.

[Nick Timoros]

I think you're referring to this knack he has for repeating sentences backwards. So if you say something, he can just take it and tell you what you just said in reverse order.

[Jessica Mendoza]

Had he ever done that with you?

[Nick Timoros]

I have not seen him do it. It's kind of an awkward thing to do in the moment, but I think it speaks to how his superpower has been his listening. Whether it's meeting with his colleagues, meeting with politicians on Capitol Hill. He's in listen mode.

[Jessica Mendoza]

And he used that skill to build relationships. Here he is in an interview from 2018.

[Jerome Powell]

I'm going to wear the carpets of Capitol Hill out by walking those halls and meeting with members.

[Nick Timoros]

I feel, never mind that there really aren't carpets on Capitol Hill. But the point stands. He knew that whatever was coming, those relationships were going to matter. You know, something's going to happen, and it's good to have allies.

[Jessica Mendoza]

And Powell may have been right, because while his term as Fed chair can be seen through a series of economic crises, it can be told another way, as the story of a relationship that broke down between Powell and the president who hired him, Donald Trump. The strain between Trump and Powell started to show up just months after Trump appointed him in his first term in 2018. The Fed was worried the economy might get overheated, so it raised interest rates

[Nick Timoros]

slowly throughout the year for interest rate increases. By the end of the year, Trump hated it. And in December, amid a market sell off, Trump was talking about firing him.

[Jessica Mendoza]

But he couldn't just do that, right?

[Nick Timoros]

The law says you can only remove a Fed governor for cause. You can't just fire them because you don't like how they're voting on interest rates.

[Jessica Mendoza]

The Fed did eventually cut rates, and markets calmed down for a while, but the tension never really went away.

[Nick Timoros]

And then, of course, came March of 2020, the pandemic hits, and the Fed was thrust into this role as a first responder.

[Jerome Powell]

Our job is to meet the tests we are presented.

[Jessica Mendoza]

Lawmakers backed Powell as the Fed slashed interest rates to zero and pumped money into the financial system. The Fed started lending directly to mid sized businesses and bought corporate debt, things the central bank hadn't done before.

[Jerome Powell]

Our emergency measures are reserved for truly rare circumstances such as those we face today.

[Nick Timoros]

A lot of people in markets will tell you that was really the high point of the Powell Fed. He was widely credited with not just saving the economy, but avoiding much worse outcomes.

[Jessica Mendoza]

For a moment, Powell was widely praised, including by Trump.

[Donald Trump]

I've been critical, but in many ways I call him my mip. Do you know what an MIP is? Most improved player.

[Jessica Mendoza]

After President Joe Biden won the White House, he reappointed Powell in 2021. But the damage from the pandemic wasn't over. Supply chains were snarled. People still wanted stuff, but there was less stuff to buy, which led to higher prices. And when the Fed saw this inflation, Nick says it made a big miscalculation. It kept rates too low for too long.

[Nick Timoros]

2021 is where the mistakes start to compound. The Fed keeps saying this is transitory. Remember inflation being transitory.

[Jerome Powell]

But as these transitory supply effects abate, inflation is expected to drop back toward our longer run goal.

[Nick Timoros]

The idea there is that these bottlenecks will sort themselves out.

[Jessica Mendoza]

But they didn't.

[Nick Timoros]

They did not. And by the end of 2021, they realize they've gotten it wrong.

[Jessica Mendoza]

And what was the course correction?

[Nick Timoros]

They raise rates rapidly. Fastest increases in four decades.

[Senator or Political Commentator]

The Fed is expecting to raise interest rates three times in 2022, raising its

[News Reporter]

benchmark interest rate for the fifth time this year. It was the 11 hike in the last 12 meetings.

[Jessica Mendoza]

These aggressive measures helped bring inflation down, but they came at a cost. Borrowing got more expensive for mortgages, car loans and credit cards. And the Fed's misread would have political fallout.

[Nick Timoros]

It made the institution more vulnerable. It left the Fed politically exposed.

[Jessica Mendoza]

Politically exposed? What do you mean by that?

[Nick Timoros]

Inflation is the job of the Fed. And so if you've had a big inflation problem, it's fair to say, well, what's the central bank doing?

[Jessica Mendoza]

Over the next few years, the Fed kept trying to catch up. It raised interest rates again and again, sometimes by unusually large jumps. Eventually, inflation started to cool. And by the fall of 2024, the Fed finally started cutting rates. But the timing of those rate cuts angered Republicans, who accused the Fed of making the Biden administration look good just before the presidential election.

[Nick Timoros]

And so Trump comes back to office in 2025. He is not happy with Powell from his first term. Then he picks up where he left off. But then in 2025, takes it to a completely different register. The first move is going after Powell directly. The president threatens to fire Powell. When that doesn't work, he then goes after other people on the board, namely, in August, he attempts to fire Lisa Cook, who is a Biden appointed governor, using kind of unproven mortgage fraud allegations.

[Jessica Mendoza]

The case about the president's ability to fire Fed governors for cause is now before the Supreme Court. And then the Justice Department launched a criminal investigation into Powell over his handling of renovations at the Federal Reserve building.

[Nick Timoros]

And that's a line that crosses beyond anything we've seen up until then.

[Senator or Political Commentator]

Now, in a statement, Powell says, quote, this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure.

[Jessica Mendoza]

And all of this is being done in an effort to get the Fed to lower interest rates. Is that ultimately the goal here, according to the Trump administration?

[Nick Timoros]

It could be that it could be putting pressure on Powell to resign. It could be just, look, we can do this the easy way or the hard way. One way or another, we are going to make life very difficult for the central bank of the United States if it does not give us what we want.

[Jessica Mendoza]

A White House spokeswoman said that Trump didn't direct the investigation. Lawmakers in both parties pushed back against the probe, saying it looked like political pressure. Some key Republican senators defended Powell as an honest broker.

[Journalist or Interviewer]

I don't think Jay Powell is a criminal.

[Senator or Political Commentator]

We have got to end this investigation.

[Donald Trump]

I know Chairman Powell very well. I will be stunned. I will be shocked if he has done anything wrong.

[Jessica Mendoza]

The Justice Department has since dropped the investigation, in part to move forward with the Senate confirmation of Kevin Warsh, Powell's successor. But Nix says the probe itself was what made Powell think twice about retiring.

[Nick Timoros]

The criminal probe changes the calculation. If Trump had backed off, it seems likely that Powell would have done what every fed chair since 1970 has done, which is to leave when his or her term ends. That's the modern norm. I talked to somebody who said this was strategically inept. For anybody who knows J. Powell, it did the opposite of what it may have been intended to do if it was trying to push him out. It told him, there's a storm outside the building right now. You cannot in good conscience leave now.

[Jessica Mendoza]

And so Powell has decided to keep his place in one of the most powerful rooms in American monetary policy.

[Nick Timoros]

This is about occupying a seat. It all comes down to the Fed's Board of Governors.

[Jessica Mendoza]

That's after the break.

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[Jessica Mendoza]

Jerome Powell's term is up as Fed chair, but he still technically holds a seat on the Fed's Board of Governors for two more years. His decision to stay makes him one of seven people who sit at the center of the system that decides interest rates. But Powell's presence could make things weird.

[Nick Timoros]

You know, Powell said he wants to have a low profile. And there was this funny moment where Powell was asked by one of my

[Journalist or Interviewer]

colleagues, you mentioned that staying on as a governor, you intend to keep a low profile. I'm just wondering if you could give us a little more discussion.

[Nick Timoros]

And Powell did this sort of physical comedy. He lowered his body to lower his

[Journalist or Interviewer]

physical profile on what that looks like and how you can.

[Listener or Commentator]

Touche.

[Jessica Mendoza]

Kind of like a turtle, like, sinking into his shell.

[Nick Timoros]

Exactly. And everybody laughed. But it speaks to how almost impossible it would be for Powell to have

[Jessica Mendoza]

a low profile, because after eight years as Fed Chair, Powell casts a long shadow. That's part of why Fed chairs don't normally stick around like this. They give the new boss a clear Runway to build consensus and run the place their own way.

[Nick Timoros]

It is going to be awkward. It is going to be an awkward setup because Kevin Warsh got the job after a fairly pointed public campaign highlighting all the ways he believed the Fed had screwed up under Powell. And now the person he criticized is going to be sitting at the same table while he leads them through these discussions. You know, the math on the Fed board is there are seven governors.

[Jessica Mendoza]

Currently, those seven seats are evenly split. Three are held by Obama and Biden appointees, and three are held by Trump appointees.

[Nick Timoros]

And then there's Jay Powell. If Powell leaves, that seventh seat opens up.

[Jessica Mendoza]

Which means Powell's decision to stay denies Trump a key appointment on the board.

[Nick Timoros]

You've got an administration that has shown it will use the courts, the Justice Department, any other levers it can to try to control who sits in those seats, because those are the people who set interest rates. And so for Powell, he's not staying to secure a particular policy for interest rates or bank regulation. I don't think this is about what he will do. It's about what his presence prevents. One of the concerns that we've written a little bit about over the past few months is a clear erosion of what we call Fed independence, their ability to set interest rates without political dictates.

[Jessica Mendoza]

Trump has pushed the Fed to lower interest rates to stimulate the economy. And he's criticized Powell for not doing so. Powell says that he's trying to maintain the Fed's ability to make rate decisions, regardless of who is in the White House. Here's Powell last month.

[Jerome Powell]

I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors.

[Nick Timoros]

So by staying, Powell is taking that seat off the table and really becoming a firewall. And so for Powell, this is about protecting the institution, or at least making sure that when he does go, it doesn't lead to even a bigger fracture.

[Jessica Mendoza]

But doesn't his doesn't. The very act of staying. Isn't that a political move?

[Nick Timoros]

It certainly could be read that way. People will say, look at what he's doing now. He just won't leave. He won't let Kevin Warsh, the new Senate confirmed Fed chair, come in and run the Fed the way he thinks it should be run.

[Jessica Mendoza]

Powell has said he doesn't plan to interfere with the new chair's ability to build consensus. For his part, Warsh has called for messier Fed meetings and, in his words, a good family fight. He might just get his wish. At the last Fed meeting, four members dissented, the most since 1992. That's unusual, Nick says, and it's a sign that the committee is no longer of one mind. And while that can be a good thing, leading to less groupthink and more debate, it could also mean confusion. And confusion has a cost.

[Nick Timoros]

I'll put it this way. In the last 20 years, when you wanted to know where the Fed was heading, you really only had to listen to one voice, which was the chair. If that's not the Fed that we're going to have, if you have a committee that's openly split, regional bank presidents who are publicly pushing back, that means that instead of one signal, you're going to have a chorus potentially of competing signals and volatility around what people expect the Fed to do. Can bake in a risk premium into long term interest rates, meaning that uncertainty about the path of policy itself becomes a cost.

[Jessica Mendoza]

And now, as this more uncertain Fed is taking shape, the economy is shifting again. New data this week shows inflation picking back up to its highest level in years, driven in part by rising energy prices after the war with Iran. For the future of the Fed, Nick says that makes one thing clear.

[Nick Timoros]

Rate cuts are off the table for now. Inflation is moving in the wrong direction, and that puts the Fed in a

[Jessica Mendoza]

tough spot, which means the very thing the White House wants from the Fed, lower interest rates may not happen. And Kevin Warsh might find himself in the same place Powell did as the person who says no.

[Nick Timoros]

And we've all seen how the president responds to a Fed chair who says no.

[Jessica Mendoza]

Nick Jerome Powell was supposed to ride off into the sunset, right? But when you take a step back, you know you're looking at Powell's pandemic response, the big mistake on inflation, and then now his decision to stay. What do you think ultimately defines Powell's legacy?

[Nick Timoros]

That's a great question. When his professional obituary is eventually ridden, the people I talk to are saying he will be remembered as the chair who challenged a president's attempt to control monetary policy. And he repelled it. So if Fed independence survives holds, his legacy could look quite favorable. If it doesn't, he will be able to say he did everything the law allowed him to do.

[Jessica Mendoza]

That's all for today. Thursday, May 14 the Journal is a co production of Spotify and the Wall Street Journal. If you like our show, follow us on Media, Social, Spotify, or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.

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