Will Jay Powell Blink? - Inside the Fed Chair's Fight to Curb Inflation

In the high-stakes battle against runaway price increases, many Wall Street stock traders think Powell is raising interest rates too quickly. Others fear that he’ll stop too soon. Why this Washington lifer may have the toughest job in America.

- By Christopher Leonard

Federal Reserve Chairman Jerome "Jay" Powell stood at a podium at the Fed’s headquarters in Washington, D.C., sending a stern message to the global investment community: The central bank was going to tighten the money supply, even if it hurt.

The Fed had been maintaining rock-bottom interest rates and pumping trillions of dollars into the banking system through an extraordinary program called quantitative easing.” But now it was time to withdraw that stimulus, to keep the economy growing and inflation low. The process, Powell proclaimed, was on automatic pilot”: It would not be slowed or hindered, even if stock prices plunged or the bond market panicked. The Fed was created to do hard things like this, insulated from political pressure, and Powell was determined to do them. Taking a more hawkish stance has been a good decision,” Powell said. And I don’t see us changing that.”

It was a scene that could have played out any number of times in 2022, as Powell and the Fed stepped up to fight an unprecedented surge in consumer prices. But this speech took place on Dec. 19, 2018. Powell was still in his first year as Fed chair. The Fed had been pursuing QE” for nearly a decade, to combat the effects of the Great Recession—and worries over how its actions could distort the economy were growing in Washington and on Wall Street alike.